How Do Organizations Measure the Value Proposition? Both the numerator (Quality) and denominator (Cost) must be measured to demonstrate value.

1. How Do Organizations in Healthcare Measure the Value Proposition?
By Carlos Arias MD, MPH, CPC
How Do Organizations Measure the Value Proposition? Both the numerator (Quality)
and denominator (Cost) must be measured to demonstrate value. We achieve Quality
through Effectiveness, Patient-Centered Care, Safety, Efficiency, Equitability and
Compliance.
Both quality and cost present major challenges for healthcare organizations.
Cost: Healthcare reimbursement programs have experienced continuous and
tremendous changes in the past years. When Medicare was created, all services were
paid as fees for service, which led to tremendous increases in the cost of care because
providers had little incentive to reduce or avoid unnecessary expenditures. Years after,
diagnosis-related group (DRG) was implemented as a method for decreasing
government expenses. Under the DRG payment system, hospitals are paid a fixed
amount for each diagnosis (DRG).
After this implementation, and obviously getting some reduction on the expenses, the
government initiated another model of payment: Capitation. Capitation payment can be
defined as paying a fixed amount per individual being treated for a well-defined group of
services. So, for example, a primary care provider might receive a capitation payment of
$ 50 to $100 per member per month to provide an individual’s entire primary care
physician services, including office visits, tests and other services. Once that model
came into play the payers wanted their risk reduced and implemented “risk contracts.”
These contracts created a situation whereby if a beneficiary patient needs more than
just the routine level of care, and no proper utilization best practices or guidelines exist
for the issues or they are not followed, the provider may lose money on that individual
due to overutilization. Luckily, the provider costs are spread across a population of
individuals so that providers or organizations such as Independent Physicians
Association (IPA) or Managed Care Organization (MSO) consider the entire population
that is capitated, rather than just an individual, and calculate if the total payments can
offset the total costs.
This is a very complicated topic that physicians face today. Overutilization of resources,
readmissions, inappropriate use of resources, duplication of tests, lack of care
coordination, and myriad other issues are causing an increase in the cost of these
programs, while Medicare decreases the payments to physicians year after year.
Our organization is facing these challenges and has decreased costs by increasing
infrastructure in Human Resources and technology across the entire organization. By
doing so, we can deliver a higher quality of care despite the “cost crisis” in healthcare.
Our model has been proven to work in this environment.

2. Quality: The degree to which health services for individuals and populations increase
the likelihood of desired health outcomes and are consistent with current professional
knowledge is the definition that I would like to use to describe this value. The concept of
P4P has now become an industry standard and likely will persist into the future, as will
the 5 Stars Rating programs. These programs have not been around long--Stars rating
is a newborn—but while the outcomes are not defined yet, they have had an intense
start.
Infrastructure enhancement, education and training, improving technology, monitoring of
and detailed, current information on each and every patient are important factors to
increase the quality of care.
The following values integrate with and further define modern Quality care:
Effectiveness: I must emphasize the importance of using evidence-based and best
practice guidelines to provide high-quality care. Incorporating the most current valid
research evidence into decision making and combining this with patient experience is
essential to ensuring that care is properly delivered. Decreasing resource waste through
adequate staffing, assessment and utilization of modern technology, processes and
systems is also crucial. This type of assessment and implementation has been of
critical importance to my success as a healthcare administrator.
Patient-Centered Care: It is the expression of a higher state of compassion, empathy,
values, competencies, and relationship demanded by the most important and diverse
clients in customer history: our patients. Timeliness is key to decreasing any harm
(delay in healthcare can be catastrophic, including fatal losses). Intervention and
processes that avoid delay and denials are important operational opportunities that
operators, financial administrators and executives in healthcare must monitor very
closely. Barriers to accomplish a plan of care must be studied in detail and resolved.
Poorly chosen language may contribute to increased unnecessary admissions, side
effects of drugs, increased length of stay in the hospital and increased waiting times.
Inappropriate access to physicians or healthcare providers will increase unnecessary
admissions, re-admissions, increase of utilization of healthcare resources, unnecessary
ER visits and overall, will increase cost and decrease quality of care. Companies must
look systematically at their operations and create a cultural approach that satisfies the
needs of their patients. The patient-centered medical home approach is a positive
example of a cultural change in the healthcare industry that improves system
inefficiencies.
Safety: Safety is about preventing incorrect interventions, failure of a procedure or
process, and shortcomings in achieving a goal on a patient plan of care. Safe care
ensures correct diagnoses, avoidance of unnecessary risks, and that patients are
completely informed about and engaged with the nature and attendant risks of
diagnostic and therapeutic interventions. Understanding the patient culture and
effectively communicating with patients enhances the accuracy of the medical attention
process that includes, but is not limited to, the provider-patient relationship, diagnoses,

3. testing and pharmacological and non-pharmacological treatments. This ensures holistic
wellness.
Efficiency: Performance monitoring and optimization partnered with reduction of waste
it is the right way to be efficient, reduce cost and increase quality.
Equitability: Provide care despite gender, ethnicity, socioeconomic status,
geographical location, insurance company, or patient benefits (payer blind concept).
Identifying, constructing and stratifying indicators should be transferred to quality
improvement activities. The use of Population Management as a tool to drive a better
delivery system and propagation of Specific Case, Disease and Complex Case
Management programs will lead our organization to be effective in delivering care to all.
Compliance: The goal of the Program is to “promote the prevention of, detection, and
resolution of potential violations of the multitude of laws and regulations that affect the
work in all aspects of the business.” We utilized the Department of Health and Human
Services’ Office of Inspector General (“OIG”) Compliance Program Guidance for
Hospitals, the OIG’s Compliance Program for Individual and Small Group Physician
Practices and Federal Sentencing Guidelines (collectively referred to as “Guidance”) as
a foundation. A comprehensive compliance program incorporates the following seven
elements as recommended by the Guidance:
(1) High level oversight
(2) Integration of compliance into policies and procedures
(3) Open lines of communication
(4) Training and education
(5) Monitoring and auditing
(6) Response to detected errors
(7) Consistent enforcement of standards
Every compliance program should include written policies and procedures that address
specific risk areas to the practice. These policies and procedures should be reviewed
and updated annually to align with current practice operations. The culture of the
company should adopt compliance as its internal DNA.
The designation of a specific Compliance Officer (CO) with the appropriate experience,
authority and resources is critical to the success of a compliance program. A supporting
compliance committee should be responsible for assisting the CO in assessing a
practice’s regulatory, compliance and legal environment; developing standards of
conduct and policies and procedures to promote compliance; developing a system to
identify, report and respond to identified issues; and designing a system of controls to
carry out the practice’s compliance-related obligations.
Weighing cost and quality measures as further defined by the values described above, I
think an organization can address the value proposition in a more focused way and use
it to define who they are. “Selling” any company can be complex, but health insurance

4. companies and payers do examine the quality value proposition, and when the factors
of the value proposition are not balanced, it can lead to dissatisfaction and loss of
business. Healthcare customers want and need quality care, and therefore quality
should be the overall criteria for defining a Healthcare organization.