IN recent years, the Australian health care system, in the realisation that the current model is increasingly unsustainable, has faced a critical question: how to challenge the fundamental tenets of the drivers of service delivery, and to entertain a significant shift in mindset and consider the adoption of value-based health care (VBHC) models. Those in health care have been asked to reshape the fundamental forces of market competition, to refocus on generating value that matters to patients and to rethink the very nature of legacy service delivery models that have been long established.

Since Michael Porter published his book Redefining health care: creating value based competition on results, VBHC has increasingly been seen as a system to revolutionise health care. The World Economic Forum defines value-based care as the health outcomes that matter to patients relative to the resources or costs required. That is, a focus on maximising the value of care for patients and reducing the cost of health care, by defining patient value as patient-relevant outcomes against the costs per patient across the full cycle of care in order to achieve these outcomes. VBHC outlines a framework for creating systems that reward the quality of care delivered instead of current drivers that reward the volume of care that is provided. This develops models where health care is funded and delivered with a focus on outcomes, achieved at an affordable cost for patients and the health system.

For VBHC principles to influence the adoption of value-based models within our existing health systems, we need to appreciate the crucial role that leadership plays in that process. Individual leaders’ capabilities and the impact their leadership styles have within organisations and their internal cultures are key to shifting this mindset of health care delivery from volume towards value (here and here).

Over the past year, the global health system and its leadership alike have faced an even greater challenge: a devastating and almost unprecedented global pandemic. We have watched the COVID-19 pandemic as this unanticipated disruptor devastated lives, overturned global economies and single-handedly halted the modern world in ways we never imagined.

Those in the sphere of VBHC, and those that had already begun the transition to value-based care models, make a compelling case in support of the structures that enabled their response to the pandemic. That, as a means of transitioning to value, they have the right elements and integrated systems in place which were crucial in responding. Had such elements, including care coordination, patient tracking, telehealth, integrated information technology models and ensuring accountability for defined patient populations, been in place, this may have resulted in a better preparedness to weather the pandemic storm.

The pandemic has shown that many parts of the fee-for-service health care are broken, and what is being done including post-acute is not enough. The Red Signal Report: value-based care examines the health care industry’s shift from volume-based reimbursement to value-based care models as providers seek to improve care quality and reduce costs.

“The combination of COVID-19 and an economic recession has only accelerated the transition to value-based care as employers and consumers look for ways to manage spending, driving the demand for value,” said Brian York, vice president of value-based medical liability insurer Coverys.

“Additionally, during the first COVID-19 surge, many providers who transitioned to value-based fared better than those who leaned entirely on fee-for-service models. For these providers, revenue remained consistent during lockdowns while elective procedures were delayed and cancelled, further underscoring its value to providers.”

Dr Tarek Elsaswy, a physician and President and CEO of Reliant Medical Group in the Worcester, Massachusetts area, and Regional President for OptumCare, leads a large group of physicians trying to push higher value care.

In a recent interview Dr Elsaswy said:

“I am convinced that the way that we’re going to get there is to further align our payment methodology and incentivize fixing those things, because if we haven’t learned anything [else] from COVID-19, there are so many parts of the fee-for-service system that are broken. This allows us to align it in a much more complete way.”

John Poziemski, managing director of Kaufman Hall, an international financial and consulting service, said that:

“COVID-19 brings with it a level and breadth of uncertainty that previous healthcare market changes did not. The pandemic is a clinical, economic, and social crisis that has and will continue to alter the normal course of business in fundamental ways, from organizational structure to care delivery processes and modalities.”

This creates a need for organisations to accelerate their thinking about how to transform their approach to reimbursement and care delivery.

In a recent Deloitte article, the author notes the significant impact of COVID-19 in terms of increased waiting lists and the subsequent pressure on funding and scrutiny of spending in health care and concludes with the following challenge:

“It is likely that the issues and developments arising from responses to COVID-19 could act as a catalyst for wider adoption of VBHC. It is time to seize the opportunity, now.”

This question is important particularly when considering the Australian context. Health care in Australia is a complex web of providers, funders and purchasers that are organised primarily around medical specialties. It is a legacy system where fee-for-service payments incentivise increasingly higher volumes of services delivered, and outcomes are measured from a process and compliance-driven perspective. Each hospital or health service strives to offer as many lines of services as they can, with health care providers often being limited to serving their immediate geographic catchment areas.

It is no surprise then, as the pandemic hit our shores, we saw how private health care, which is dependent on a continual flow of patients and the traditional fee-for-service models, experienced a sudden drop in revenue (here and here), particularly as the public health response halted elective surgery, in-person consults, and with an impact on hospital bed days.

The October 2020 Kaufman Hall article outlines how external and environmental factors such as COVID-19 have disrupted the traditional vertical value chain of health care provision, and created a number of long term market effects that are likely to be important drivers in future health sector strategy. It advocates for a collaborative and partnership model between payers and providers to align their efforts to a common goal in order to pursue value-based care models that achieve greater affordability of care. Four strategy pivots are recognised as being essential for health care leaders to ensure their organisations stay resilient, competitive and relevant:

  1. recognising the patient’s requirements at each decision point of the care pathway;
  2. actively pursuing population-based economic models in spreading their revenues, costs and margins across the whole system as opposed to relying on patient volumes (given the obvious shortfalls that have been observed by relying exclusively on fee-for-service payment arrangements);
  3. understanding each organisation’s total cost of care and defining what level of performance it must achieve on these grounds to remain competitive within its market; and
  4. rethinking access and care models to expand (and/or partner with third party platforms) virtual care services and investments in telehealth technologies.

If organisations are aligned to value-based care strategies, and have a broad set of payment models, it is likely to ensure the financial sustainability of the service if and when its fee-for-service revenue dissipate.

The Global Innovation Hub for Improving Value in Health Report, an initiative of the G20 Health Working Group in 2020, found that countries that have implemented VBHC have suffered fewer consequences as a result of the pandemic and those that implemented VBHC reforms during the pandemic have had a “greater control” over health spending during the pandemic and maintained a high quality of care. This is a key finding from the case studies received from 12 countries that are members of the Hub on the health system solutions that were implemented which were directly informed by VBHC implemented in response to COVID-19.

From the public health care perspective, the pandemic has had a significant impact on screening for cancers and elective surgery and procedures. As reported by the Victorian Cancer Registry, it is estimated that more the 2500 cancer diagnoses were missed or delayed due to the pandemic and lockdown response in Victoria. Late diagnoses will likely result in increased demand of cancer care and subsequent costs on the health care system. It is clear that the full clinical impact of the pandemic is yet to be determined. In addition, the question has been asked as to whether the “rationing” of access to care during the pandemic may result in patients taking legal action due to impact on their health.

In response to the clinical impact of the pandemic, the Victorian Government’s Department of Health and Human Services, in conjunction with the three Victorian Research Translation Centres – Monash Partners, the Melbourne Academic Centre for Health and Western Alliance – have formed a collaborative “to research and translate evidence to improve the health of Victorians”.

The Victorian Collaborative Healthcare Recovery Initiative will “contribute to the redesign and improvement of Victoria’s healthcare system and support a strong recovery from the COVID-19 pandemic”.

One of the projects under the collaborative’s umbrella is a “quality improvement project … to promote high-value use of colonoscopy in Victorian public hospitals”.

“Optimising use of colonoscopies will reduce risks related to unnecessary procedures, reduce wait times for those who would receive benefit, and promote timely detection and treatment of bowel cancer,” according to the project’s website.

The aim of the project is to optimise “right care”, using a learning health systems approach, and to codesign and implement strategies to reduce low value care. This approach has the potential to be replicated across specialties and services in health.

The pandemic’s full impact on our society, all citizens, and the health care system is still to be determined. What is more clear is the need to let go of conventional approaches to the evolution of health care strategy, where largely incremental change at a slow pace taken over multiple years has been required to modify the status quo. The challenges of a sustainable health care system have never been so concrete. With the emergence of the COVID-19 pandemic, there’s significant uncertainty that’s facing society as a whole, as a result of the significant disruption that has affected our traditional approaches to health care economics. VBHC may prove one of the strategic drivers to not only lead our health care system into the future, but also to determine the pace of change that is required.

Dr Sidney Chandrasiri is Group Director (Academic and Medical Services) and Deputy Chief Medical Officer at Epworth HealthCare.

Associate Professor Luis Prado is Chief Medical Officer and Executive Director (Academic and Medical Services) at Epworth HealthCare.




The statements or opinions expressed in this article reflect the views of the authors and do not represent the official policy of the AMA, the MJA or InSight+ unless so stated.


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