In the global debate about value-based health care, the lion’s share of attention has focused on the developed world. It makes sense. The new emphasis on value is, in large part, a response to the failure of conventional cost-control initiatives to stop or slow the rapid growth in health care costs. And the vast majority of those costs—roughly three-quarters of global expenditures on health care—are in the developed world. (See “The Case for Value-Based Health Care.”)
In the global struggle to manage the cost of health care, both clinicians and policymakers are increasingly focusing on value. By analyzing the results achieved and resources used in well-defined patient populations (for example, diabetics or the frail elderly), health systems around the world are starting to document large variations in health outcomes as well as extensive differences in clinical practice.
Making the data available allows clinicians to identify best practices and helps to steer resources toward the clinical centers and specific clinical interventions that achieve the best results. Such efforts are facilitated by the proliferation of new systems and capabilities in health care informatics that make it possible to collect outcomes data and share it broadly with clinicians and the public. We call the delivery of improved health outcomes for defined segments of the population at the same or lower cost value-based health care.
The cornerstone of the value-based approach to care delivery is the systematic measurement of health outcomes by disease (for example, diabetes), procedure (for instance, hip replacement), or segment of the population (say, the frail elderly). The systematic collection of detailed information on health outcomes makes it possible to identify variations in outcomes across clinical sites, analyze the root causes of those variations, and codify best practices (that is, those that produce the highest-quality outcomes). Making the data and analysis transparent—in the first instance to clinicians, and eventually to the public at large—then becomes the catalyst for the definition of new standards, the dissemination of best practices across the system, the reduction of variations in outcomes, and the improvement of median health outcomes over time. (See the exhibit.)
In addition, the tracking of health outcomes and their use in continuous quality improvement make it possible to link costs to outcomes and to identify the most cost-effective types of care. This often has the positive side effect of lowering total health-care costs for some medical conditions, because unnecessary procedures are eliminated, expensive complications occur less frequently, and repeat treatments are avoided by getting it right the first time.
Another key dimension of value-based health care is the integration of clinical care for specific medical conditions and the populations of patients who suffer from them.
Integration allows providers to better coordinate care along the care-delivery pathway, take advantage of the learning curve associated with higher volumes, clarify roles, and improve accountability. It also allows payers to develop a global view of costs in the system and make informed trade-offs—for example, investing in preventive care in order to avoid high treatment costs at later points in the value chain.
Finally, once health outcomes are tracked systematically and care is integrated, a health system is in a position to develop meaningful value-based incentives on the basis of the accurate measurement of costs and the design of bundled payments appropriate to the disease or condition in question. Such incentives allow decision makers to orient competition among providers around value, so those providers that deliver high-value care are rewarded.
Since 2009, The Boston Consulting Group has conducted groundbreaking research on value-based health care, including on the impact of disease registries, on the best way to define health outcomes, on the challenge of eliminating unnecessary practice variation across providers, and on the potential of managed care to improve health outcomes.
BCG is a cofounder of the independent nonprofit International Consortium for Health Outcomes Measurement (ICHOM) and works with provider organizations, payers, and pharmaceutical and medical technology companies to help them design and implement value-based approaches to care delivery.
And yet, we believe that some of the biggest opportunities for value-based health care today are to be found not in advanced economies but in emerging markets. There are powerful incentives for emerging-market providers and policymakers to organize their health systems around maximizing health care value for their populations. Although these markets represent only about 25% of health care expenditures worldwide, their expenditures are growing at a much faster rate than those in the developed world. Since 2000, for example, China’s spending on health care as a percentage of GDP grew almost five times as fast as that of the EU and more than three times as fast as that of the US. (See Exhibit 1.)
Even though the GDP of emerging markets is also growing rapidly, allowing these societies to afford more health care than in the past, many of these countries do not have—and may never have—the resources to replicate the high-cost model of care delivery found in many developed countries. For example, we calculate that it would cost Nigeria $51 billion—which represents 20% of its 2012 GDP and 10 times its 2012 public health budget—simply to bring its number of physicians up to the median number in the OECD countries. And, given Nigeria’s current training infrastructure, such an expansion would take 300 years. The enormous difficulty of replicating the developed world’s care delivery model is another strong incentive for emerging markets to think differently and embrace value-based health care.
It should therefore be no surprise that some of the most interesting experiments in value-driven care delivery can be found in the developing world. To cite just one example, India’s Aravind Eye Care System is a global leader in tracking health outcomes for cataract surgery and in creating innovative care-delivery models that bring high-quality low-cost cataract surgery to India’s masses.
But before emerging markets can move beyond a few innovative providers to establish national systems for value-based health care, payers, providers, and policymakers will need to address a fundamental challenge: systematically collecting and analyzing comprehensive health outcomes data. By tracking health outcomes for the various population groups and medical conditions that represent the biggest needs in a country’s health system, stakeholders can determine the impact of investments in health care and identify innovations in care delivery that improve outcomes at the same or lower cost as previous approaches. And yet, the vast majority of emerging markets lack the necessary infrastructure—including IT systems, disease registries, and integrated health systems—typically used to collect and effectively exploit outcomes data.
The lack of an infrastructure may appear to be an insurmountable obstacle. On the contrary; we believe it represents a major opportunity. Because emerging markets are not burdened by legacy systems and the massive complexity of integrating separate data sets, they are in a position to leapfrog existing technologies and approaches. In particular, they can leverage the widespread penetration of mobile communications networks to introduce innovative approaches to connectivity and data collection and scale them up rapidly. The analogy is to what has already happened in many emerging markets in areas such as mobile telecommunications and mobile financial services. Entrepreneurs have developed entirely new infrastructures and services from scratch, bypassing the creation of traditional landline networks and physical networks of bank branches.
In the pages that follow, we first describe the leapfrogging concept in more detail. Then, to provide a concrete illustration of what it could mean for value-based health care, we introduce a BCG-designed prototype for a cloud-based mobile solution called “Our Health Journey,” which would allow patients in an emerging market to track their health outcomes using smartphones. We conclude with six principles for jump-starting value-based health care in emerging markets.