June 18, 2021

Value-based healthcare: why less is more

Better for patients, practitioners and taxpayers, value-based healthcare takes a more holistic approach to funding and treatment – and it’s gaining momentum.

For a patient left immobile from a painful hip condition, an end to their immediate discomfort would be a successful clinical outcome under Australia’s current healthcare model.

But looked at under a value-based healthcare model, the resulting improvement in quality of life and social confidence – plus the likely reduction in future health complications – would also be a measure of success, for the patient and our healthcare system.

The concept of value-based healthcare was introduced by Harvard Business School professor Michael Porter and innovation expert Elizabeth Teisberg. In their 2006 book Redefining Health Care: Creating Value-Based Competition on Results, they defined patient value as the health outcomes achieved per dollar spent.

The pair believe that achieving high value for patients must become the overarching goal of healthcare delivery, pointing out that if value improves, patients, payers, providers and suppliers can all benefit while the economic sustainability of the healthcare system increases.

“Value-based healthcare is a concept that’s gaining traction globally,” says Kate Galvin, Customer Executive of NAB Health. “It’s important for participants in the Australian health sector to understand the changes and improvements this different way of measuring outcomes may drive.”

One significant step forward in Australia was the 2019 launch of the Australian Centre for Value-Based Health Care. Established by the Australian Healthcare & Hospitals Association (AHHA), the centre’s vision is for a healthy Australia, supported by the best possible healthcare system.

“Value-based healthcare focuses on achieving desired patient outcomes in the most cost-effective way,” AHHA Chief Executive Alison Verhoeven says. “It’s also a philosophy based on taking a person’s life and goals into account rather than just fixing what’s wrong.”

Paying the price for piecemeal care

A siloed, complex and costly structure is piling the pressure on healthcare here in Australia. According to a 2020 Australian Institute of Health and Welfare report, in 2017-18 Australia spent an estimated $185 billion on health goods and services. Government funding accounted for 68 per cent of this; other non-government sources included individuals’ out-of-pocket expenses (16 per cent) and private health insurers (9 per cent).

“This piecemeal approach means that primary care, private hospital care and public hospital care are paid for separately,” Verhoeven says. “This can entrench fragmented care and make the funding of treatment for a single patient very complex.”

Verhoeven gives the example of a patient with cancer who might be diagnosed in the primary care system, stay in a public hospital for surgery, visit a private hospital for chemotherapy then return to primary care for monitoring, all of which requires funding from different sources.

“Value-based health care takes a more integrated approach, centring on a patient’s overall outcomes rather than looking at treatment as inputs and outputs,” she explains. “It involves thinking in terms of the total cost of the entire treatment – an option we think of as a ‘bundle of care’.”

Working towards the same goal

Gillian Leach, Chief Executive Officer of the Australian Association of Practice Management (AAPM), has suggested that the existing fee-for-service system can actually work against efficient models of care.

In the 2018 position paper General practice financing in Australia: Towards a model that rewards value she wrote that “the requirement for the general practitioner to deliver the service so that a fee can be billed frequently results in GPs providing aspects of care that could be safely and effectively delegated to another team member such as a primary health care nurse”.

Others have argued that fee-for-service leaves many practitioners significantly out of pocket. A 2016 study published in the Medical Journal of Australia (MJA) found that 69.5 per cent of GPs were providing non-billable care outside patient visits, including time spent arranging tests and referrals and consulting specialists or allied health professionals.

It seems that value-based care might deliver benefits to both sides of this equation. On one hand, it would reward doctors for every aspect of their care for a patient’s health and wellbeing, as Professor Glenn Salkeld, Executive Dean of the Faculty of Social Sciences at the University of Wollongong, told the MJA. And, as Verhoeven points out, by supporting appropriate delegation, it would allow doctors time to focus on their specialist skills.

“Delegation should also be a more effective way to use funds,” she says. “Other practitioners such as physiotherapists and pharmacists might also feel more fulfilled when they’re given a chance to use all of their skills.”

Staying open to change

The past few years have seen moves to incentivise value-based healthcare in Australia.

“The chronic disease management item added to the Medicare Benefits Schedule a few years ago allows GPs to plan and coordinate care with two or more other providers,” Verhoeven says. “However, that’s not necessarily focusing on outcomes and whether the care is achieving the patient’s broader goals.” She says another initiative, the Practice Incentives Program Quality Improvement Incentive (PIP QI), is a more significant move towards value-based care “because it ties financial reward to improved patient outcomes”.

Launched in 2019, PIP QI pays practices to participate in activities that will improve patient outcomes through delivery of high-quality care. According to the Royal Australian College of General Practitioners PIP QI fact sheet, the payment depends on the size of the practice, up to a maximum of $12,500 per quarter.

Even accounting for these incentives, with its diverse stakeholders, competing interests and professional cultures, transforming healthcare won’t be easy.

But Verhoeven is optimistic. “The good thing is, that in my experience, most people in the system are in favour of value-based healthcare,” she says. “I think we’re talking about being open to change, and having everyone in the room able to contribute to what that change might look like.

“We just have to remember that value-based healthcare would be good for patients and good for funders as it supports what clinicians and other practitioners aspire to do, which is to provide the best possible care for their patients.”