Putting Value-Based Health Care into Practice

Putting Value-Based Health Care into Practice

          
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From Concept to Reality

Putting Value-Based Health Care into Practice in Sweden
Health Care, Strategy
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  • Health care costs continue to rise at an alarming rate, far outpacing the growth of both national economies and household incomes. In the United States, the bill stands at 18 percent of GDP—and costs have risen three times faster than economic growth over the past 20 years. Other major Western countries face similar challenges, with health care costs consuming nearly 10 percent of GDP and increasing at twice the rate of economic growth. (See Exhibit 1.) Aging populations—the “grey tsunami”—will only lead to greater demand for medical care, while unprecedented pension obligations pressure national treasuries already severely strained by the global economic downturn.

    exhibit

    The answer, one might think, is simple: drive out inefficiencies, slash reimbursement, control margins, and limit utilization. But a focus on volume and cost alone is misguided and counterproductive. For two decades, governments and other payers around the world have applied these levers—yet health care costs continue their inexorable ascent. And there seem to be few viable alternatives: cutting benefits inevitably leads to charges of rationing, while increasing taxes on all but the wealthiest is dismissed as politically untenable.

    A new approach is needed—one that will reorient health care systems around a more encompassing metric. Four years ago, Michael Porter and Elizabeth Teisberg introduced just such a concept—value-based health care (VBHC)—in their book, Redefining Health Care: Creating Value-Based Competition on Results (Harvard Business Press, 2006). The goal of VBHC is not to minimize costs but to maximize “value,” defined as patient outcomes divided by costs. To implement VBHC, providers and payers must identify, codify, and promote treatment protocols that are proven to yield better, more cost-effective care. The patient’s well-being is thus an explicit part of the equation.

    Some health care experts are quick to dismiss VBHC on the grounds that a lack of timely and reliable data, the divergent interests of stakeholders, and the industry’s aversion to wholesale transformation would stonewall meaningful progress. In the real world, the argument goes, VBHC would be impossible to orchestrate. But the experience of the Swedish health care system suggests otherwise. Over the past several decades, Sweden’s health care sector has developed a number of disease registries—vast repositories of data on the outcomes for different patient groups. The information has helped providers identify value-based treatment protocols, leading to improvements in both efficiency and patient outcomes.

    Sweden has not created a full-scale version of VBHC, but it has found a practical solution to the single largest challenge—obtaining timely and reliable data. This approach provides a glimpse of what other industrialized societies could achieve by investing in disease registries and collecting outcomes data at a national or even international level.

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