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Caveats to Consider When Calculating Healthcare Value

Healthcare CostsConcerns about the impact of healthcare costs on the economy and the exploration of new reimbursement models have colluded to encourage a transition “from volume to value” in US healthcare. “Volume” meant that healthcare providers received a payment for providing a particular service, regardless of outcomes or need; healthcare reimbursement has been volume-based for 50 years.

Value, which explicitly incorporates outcomes, is broadly defined as outcomes divided by costs:

Math Eq


Patient outcomes include aspects of the healthcare delivery process that affect patients (eg, satisfaction with care) and clinical and functional outcomes (eg, whether a procedure was completed without complications and whether it worked to improve a patient’s functional level, respectively). Need for the healthcare delivered is implicit in the equation, because value-based care removes incentives to provide care that is not anticipated to have a measureable positive impact on patient outcomes. Costs are defined as all costs—including opportunity costs—incurred in the healthcare delivery process. There are 2 ways to improve value: improve outcomes measures at a faster rate than costs increase or decrease outcomes at a slower rate than costs decrease.

Although measurement challenges inherent in this equation have been articulated by Snyder et al,1 the value equation, despite its apparent simplicity, is dogged by 3 additional questions that need to be answered before its widespread use and interpretation.

Value for whom? Because of the way healthcare is funded in the United States, it is important to define the beneficiary of value creation.2 There are 3 candidates with quite different perspectives and interests: the society as a whole, insurers, and patients who are receiving the benefits…

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–William B. Weeks, MD, MBA, James N. Weinstein, DO, MS

This article originally appeared in the August 2015 issue of The American Journal of Medicine.


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