How Value-Based Care Can Bring Down the Costs in Healthcare Industry?


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  • What is value based healthcare?

    Improving the performance of any kind of organization relies on the shared goals and interests of all stakeholders. Value means the preeminent goal and it refers to the output achieved relative to the input (cost) incurred. We need to measure value to understand the performance of our organization as an essential approach for future improvements.Value in healthcare has same yet unique concept. It’s not a cost reduction, it should have imped the framework for performance improvement in health care. Institution of Medicine identifies 6 goals of healthcare delivery system: Safety, patient-centeredness, efficiency, effectiveness, timeliness, and equity. Therefore, it should be revolving around the customer, not the supplier; it’s more related to the patient health outcomes attained on each dollar spent. Value is an essential element in healthcare industry, as it reflects what ultimately the customer (the patient) wants which can’t be achieved unless there is a unification all the stakeholder’s efforts. Once the value improves, all stakeholders; patients, payers, insurer, providers, and suppliers can also benefit. Value implies different goals addressed in any healthcare settings, such as; quality, cost containment, profitability, safety, patient-centered care, patient satisfaction, convenience, improving equity and accessibility.

    How does value based healthcare reduce costs?

    To generate an effective healthcare business model, we should consider how to sustain in the market by getting more financial stability. This sustainability can never be attained unless we provide value-based healthcare. Value in healthcare should be measured by the outcomes, not the inputs, and also not in the outputs which refer to the volume of services delivered. “More care is not always better care, that’s why we should shift our healthcare business model from the volume-based services to value-based ones”. Measuring value is more related to the outcomes gained vs the cost needed, however, cost reduction without achieving the desired goals is very dangerous.

    Value increases when better outcomes are attained at lower cost and outcomes improvement is a way to reduce costs; for instance early detection of disease will help using less invasive care and lead to faster recovery or fewer complications. Nevertheless, unnecessary use of screening is inefficient and will be value destructive. To reduce cost, we should spend money on high-value services, such as preventive or early stage of care. Whereas shifting the service from one provider to another or from one payer to another, won’t add any value, but will increase administrative expenses.

    So to efficiently handle value-based healthcare, you could earn your One Year European MBA in Healthcare Management or your Online Post Graduate Diploma in Healthcare Management & Leadership from the comfort of your own home, on the road, or during your breaks at work. Learn while you earn, without any downtime from your work. Contact us today to speak with our Academic Advisor to know more about this program.


    – Porter ME, Teisberg EO. Redefining health care: creating value-based competition on results. Boston: Harvard Business School Press, 2006.

    – Institute of Medicine. Performance measurement: accelerating improvement. Washington, DC: National Academies Press, 2006.

    – National Committee for Quality Assurance (NCQA). HEDIS and quality measurement: technical resources. NCQA

    – Porter ME. What is value in health care? N Engl J Med 2010; 363:2477-81 (10.1056/NEJMp1011024

    – Harvard Business Review (2015). What healthcare leaders should do to improve value for their patients?

    – New England Journal of Medicine (2015). Measuring costs and outcomes in healthcare.

    – Laura S. Kaiser et Thomas H. Lee, (2015). Turning value-added based healthcare to a real business model

    – Siemens (2015). Value-based healthcare delivery: Building healthcare business model.

    Written by:

    Jazla Fadda

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