Articulating Value in Value-Based Payment Opportunities

July 10, 2017


Articulating Value in Value-Based Payment Models

Steve WoodA Note from CODE: Welcome to Professor’s Corner, a series brought to you by Steve Wood, Ph.D.


Value-based payment arrangements are growing in number and types. Common elements throughout each model include a defined set of services, over a period of time, for a fixed cost. The typical performance metric of greatest, sometimes singular, focus is cost – certainly for those paying.

However, a more thoughtful and effective view of performance in these arrangements is articulated by Michael Porter’s equation of value, which is: Value = Outcomes/CostValue Equation

In most instances, the cost data is messy but is readily available to providers. The challenge comes in articulating the delivered value that is provided to the patient. This is where patient-reported outcomes (PROs) serve very effectively.

Patient-Reported Outcomes + Cost measures true value

The PRO surveys developed and credentialed for many surgical procedures (and other treatments) provide a valid and reliable resource to use in gathering pre-surgery and post-surgery information from patients. The surveys patients take then reflect their views of a procedure and its impact on their functionality, and related factors. Therefore, PROs indicate individual and comparative performance by providers in ways that express true and defensible value to payers.

PROs also offer intelligence to improve procedure performance and patient satisfaction. Collecting and storing PRO data for use in assessing performance, identifying best practices, and negotiating value-based payment arrangements is an activity with a very high ROI.

Doing so in ways that do not interrupt provider and staff’s focus on patient care is possible and should be sought to keep administrative costs down and productivity up. As John Schupbach indicates in its HBR article, “As providers continue to refine their approaches to collecting PROs, they should consider developing simpler approaches for capturing feedback from patients.”

Benchmarking is the tool that allows an organization to articulate value

Back to articulating value, the key here is the advantage offered by the provider and organizational benchmarking performance against others, using common and verified standards. Benchmarking provider performance as measured by PROs provides a valid and defensible way of understanding and communicating absolute and comparative performance by the surgeon and associated care teams. This establishes the delivered value as measured by patient-assessed functionality (and associated factors), which forms the basis for the numerator in Porter’s Value equation above.

Having benchmark data (seen below) also allows providers and administrators to identify the best performers and seek their best practices. Conversely, benchmarking also identifies providers performing below the standard and seeks to understand why. Benchmarked data can also assist in adjusting the surgical and/or care approach. Finally, benchmarking lets an organization know exactly how it (or subsets thereof) is performing against these credentialed outcome measures.

These diagnostics help the practice manage itself more effectively by addressing both the numerator and denominator of the value equation. The results in this graph represent the average outcomes as measured by data from the CODE Orthopedic Registry, but any external registry of relevance can inform about the organization’s relative performance and thus comparative delivered value for this/each procedure.

Using benchmarked PRO data as the numerator and procedure cost information as the denominator affords practices the ability to articulate their value in bundled payment and/or value-based payment arrangements. As benchmarking can be performed across other dimensions of interest, such as payer type, discharge approach and patient characteristics (e.g., co-morbidities, BMI), practices can review internal practices, policies and arrangements for managing the care of their patients more effectively and cost-efficiently.

PROs communicate delivered value by the practice as viewed by their patients. This information affords practices with the ability to demonstrate their performance and complete their Value equation for participation in value-based payment arrangements.

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Need more help with your PRO related questions? CODE can help! Schedule a call with a CODE expert today to get you on your way to better harnessing your patient reported outcomes.