Health and Healthcare

Value-based healthcare payments are the future. Here's how to move from taxi to take-off

Value-based healthcare means prioritising outcomes that most benefit patients and the wider society.

Value-based healthcare means prioritising outcomes that most benefit patients and the wider society. Image: REUTERS/Benoit Tessier

Keely Anderson
ZS Associates Fellow , World Economic Forum, London, UK
Shirali Mewara
Medtronic Fellow, Value-Based Payments Project Lead, World Economic Forum, Switzerland
Mary Witkowski
Fellow, Value-based Payments, Harvard Business School, Institute for Strategy & Competitiveness
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Health and Healthcare

This article is part of: Centre for Health and Healthcare
  • Value-based healthcare puts patients' desired outcomes at the heart of health decisions and systems.
  • Payments and how they are managed are a central part of any healthcare system, and value-based ideas must also apply to this aspect of healthcare.
  • The World Economic Forum has convened experts from the value-based healthcare ecosystem to share best practices and what works for them in delivering value-based healthcare payments.

Despite a decade of experiments in value-based payments, we have yet to transform global healthcare systems. We are walking, not running, towards scaled value-based healthcare and system-level changes.

Value-based healthcare means focusing on delivering health outcomes that truly matter to the individual and society at large in cost-effective ways. The focus is on putting the individual at the centre of health and care.

The pandemic spurred further interest in value-based healthcare after proving that it is no longer a leap of faith but indeed a must-have for sustainable and flexible healthcare systems.

Healthcare transformation cannot happen in silos. It requires all stakeholders to engage and commit to a change that refocuses healthcare on value for patients.

Have you read?

The healthcare sector is facing three major crises – value, evidence and purpose. Across the world, pioneers have shown that value-based healthcare can address all three.

Stefan Larsson, MD, PhD, Distinguished Fellow World Economic Forum, Board Member and Founder of ICHOM, Senior Advisor to BCG

Value-based healthcare payments mean more than controlling costs

Many stakeholders across healthcare interpret improvements in value to mean cost-cutting exercises. While cost is an essential component of the value equation and a major concern in healthcare, the full value expression aims to re-focus the delivery model on the patient's needs, improving quality while managing costs.

Payments are one of the five critical enablers that drive value-based healthcare and a key area of focus for the World Economic Forum.

Payment mechanisms direct funding and shape incentives and provider behaviour. Value-based payment models can transform the underlying healthcare delivery systems, addressing four key issues:

1. Refocus on outcomes

Current payment mechanisms provide payment regardless of the degree to which they improve patient outcomes. We need healthcare payment models that orient around outcomes that matter to patients and, in tandem, an ability to track and access outcomes data through digital platforms. A focus on value in healthcare will organize healthcare systems and stakeholders around the fundamental purpose of healthcare professionals throughout history — “doing their best for patients given the resources available.”

2. Fragmented care delivery

Care delivery is fragmented across the patient pathway because providers are paid for individualised services within it. This divides accountability. Ideally, patients should be at the centre of all healthcare activities, enabling multidisciplinary teams of providers to be autonomous in their patient care delivery yet jointly accountable for the outcomes that matter. Changing payment models allows an integrated and holistic care delivery system.

3. Rising costs

Healthcare spending is growing faster than compensation and GDP. Payment models have the capacity to reduce waste, incentivise prevention and early intervention, encourage innovation and improve appropriate access, thereby reigning in costs. Updating healthcare payment models is a critical lever for the financial sustainability of healthcare systems.

4. Health inequity

Social determinants of health contribute to the widening of health disparities. To achieve true health equity, we must have outcomes equity. Tracking and improving outcomes as a part of value-based payment models is a powerful tool for addressing health inequity. Scaling value-based payment models will ensure their use broadly, beyond just the well-funded organisations, emphasising outcomes for all.

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What is the World Economic Forum doing to accelerate value-based health care?

Insights on building value-based payment models

The World Economic Forum’s Global Coalition for Value in Healthcare created a Global Enablers Payments Community network to exchange experiences and thereby accelerate the pace of healthcare transformation. Consisting of dozens of experts across healthcare sectors, the community exchanges case studies on value-based payment models and brings local, regional and national learnings to a global platform.

These adopters shared what they learned in their pursuit of value-based payment models and what could be implemented at the national level.

Here are five key insights they shared.

1. The right model

Choosing the right opportunity for value-based payment models is critical. The appropriateness of the different value-based payment models will depend on the patient type and the accountable entity, if the condition is acute, chronic or elective and whether the responsible entity is a specialist or primary care. For Pharma or MedTech organizations, the suitable value-based payment model depends on the level of uncertainty regarding the product’s impact and role in the value chain.

2. External partnerships

Historically, new payment models have required prolific negotiation and created mistrust across partners. A successful value-based payment model requires a new way of partnership with a shared vision of enabling payments that improve patient outcomes and the resources, skills and capacities to make it happen. Government and policymakers play an important role in reducing payment model complexity, requiring model utilisation and supporting the enablers that facilitate their development. Stakeholders must restructure how they work, emphasising trust and a shared mission, using longer-term agreements with added flexibility.

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3. Robust data

Some interventions require a long-term horizon to assess value and ROI. Hence a cross-payer and cross-stakeholder data exchange capability is necessary as patients move along the care continuum. Transparency is particularly important, so the outcomes across the full care cycle are visible to the provider. A consolidated platform with interoperable systems along the care chain is critical to scale and expand value-based payment models.

4. Outcomes that matter

Aligning on the right set of outcomes that discern payment accountability is a crucial element that is meticulously discussed. Just as care models should be centred around the goal of improving patient outcomes, so must payment models. Payment models will drive the incentives that reward the care delivery models' alignment around patient outcomes. The central focus on outcomes, and care delivery transformation that stems from this focus, must happen concurrently to produce a high-value and equitable healthcare system.

5. Standardisation

Structuring value-based payment models and aligning on outcomes is a time-intensive process that could be eased with standardisation, taking value-based payment models from one-off exercises to scaled implementation. Further, standardising a set of pre-competitive core principles for designing value-based payment models can reduce the administrative burden to providers caused by differing designs across payers. While payment models may be implemented differently across global healthcare systems, standardisation can relieve time and resources.

The World Economic Forum is optimistic that stakeholders across global healthcare will be encouraged to create new coalitions, partnerships, and conversations and continue disseminating evidence of successful value-based payment models; the end goal is to further drive healthcare transformation from volume of healthcare to value for patients.

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