Paying by results becomes a reality

Dr Ravi Lukha

Patient-centred care has long been the goal of many healthcare systems. And now that many of the challenges of value-based healthcare can be overcome, this goal may be within reach for the private healthcare sector, says Dr Ravi Lukha, medical director at Bupa UK Insurance.

Health insurers in the UK mainly fund and deliver healthcare using a fee-for-service model, where providers are reimbursed for each service they give to patients. 

The advantages of this model are that there is a clear reimbursement structure, which has been in place for many years with established infrastructures such as claims processing to support it, and also offers patients flexibility in choosing treatment options.

But such traditional models of reimbursement can lead to misaligned incentives; for example, limiting the focus on patient outcomes and quality of care, discouraging preventive care and fragmenting care with lack of co-ordination among providers. 

In more extreme cases, it may also incentivise volume of care provided, leading to unnecessary tests or procedures, higher healthcare costs and poorer patient outcomes.

An alternative payment model is value-based healthcare, which aims to align incentives with a focus on optimising health outcomes that matter most to patients and the value of healthcare services provided. 

The case for value-based healthcare

The Centre for Evidence-Based Medicine defines value-based healthcare as ‘the equitable, sustainable and transparent use of the available resources to achieve better outcomes and experiences for every person’.

Under value-based agreements, health insurers and providers align on reimbursement models to reward improvements in the health outcomes of patients, as well as the quality, equity and cost of care. 

Therefore, value is defined as improved health outcomes – that matter most to patients – relative to the costs required to achieve them. 

This provides an incentive to continually do better, which is in the patient’s best interest as well as the payer, as it evidences that money is well spent.

There are many advantages of a value-based healthcare model. Primarily, it puts the focus on quality of care provided and patient outcomes. 

It also encourages greater co-ordination and collaboration among health insurers and providers. It can be used as an incentive to give greater priority to preventive care and improved use of healthcare resources can also offer the potential for cost savings. 

Environmental value

Therefore, it also has great potential for positive effects from an environmental sustainability perspective, adding not just financial value but also social and environmental value. 

Value-based healthcare is not a new concept; it has been part of healthcare system discussions for some time. 

It has been implemented in many countries and healthcare systems around the world. But there are a number of challenges in its implementation in UK private healthcare. 

Its disadvantages have largely been logistics-focused. For example, the complexity of designing and implementing value-based models, the dependence on effective health information technology and data sharing, and the challenges in measuring and reporting outcomes accurately.

Another key stumbling block has been the potential for financial risks that cannot be as readily predicted based on quality, efficiency and cost targets.

However, a number of factors are now enabling health systems to overcome these challenges and encouraging accelerated adoption. 

Technology and data capabilities 

Healthcare systems have aspired to deliver value-based healthcare for a long time, but it has proved challenging because it requires overcoming established practices and working across complex, siloed organisations. 

The recent acceleration of digital technologies is helping healthcare systems to overcome these barriers. For example, these technologies enabled health outcomes to be used to remotely assess patients and provide remote care during the Covid-19 pandemic. 

Providers no longer need to rely on crude customer risk stratification using information such as age and family history. Access to large health datasets is now opening the door to more accurate, personalised risk stratification and innovative funding models and will further improve resource allocation.

Patient expectations

Changing patient expectations will also be a significant driver of this trend. Consumers are becoming increasingly pro-active and engaged in their healthcare as demonstrated by findings from a recent survey of 300 participants across UK, Australia and Spain:

This found that:

  • 52% of respondents ‘agree’ or ‘completely agree’ with the statement: ‘I would like to use tests and tools at home that can help me to test for and diagnose conditions’;
  • 48% of all respondents are interested or very interested in using a genetic test to understand their health risk.

As people become more informed about their healthcare choices, they will monitor their health and well-being, demand transparency about clinical quality and expect value for money.

Economic pressures

There is also a growing demand for value-based healthcare for economic reasons. 

The Covid-19 pandemic intensified the pressure to understand healthcare spending from governments, employers and consumers. A value-based healthcare model encourages the delivery of efficient, high-quality healthcare because reimbursement is linked to interventions that improve outcomes. 

This removes the incentive for providers to charge for unnecessary or low-value activity, removing unnecessary interventions from the customer journey and meaning that valuable healthcare resources – including clinicians’ time – can be used more efficiently. 

Health insurers can also be more transparent and assure their customer that they are offering them providers who deliver value as measured by quality and outcomes, rather than by costs.

Environmental issues

Healthcare systems are becoming increasingly aware of their responsibility towards the environment, driven by:

  • The significant effect that they themselves have on global carbon emissions;
  • The fact that healthcare systems are further burdened by the adverse health effects climate change has on population health; 
  • Healthcare professional advocacy and public awareness;
  • Anticipated sustainability requirements in market. 

Value-based healthcare can support in removing inefficiencies and waste in a system, as well as measuring the resources required to deliver any given healthcare intervention. This offers the opportunity to optimise health outcomes and reduce the environmental impact of clinical care.

Value-based healthcare represents a promising shift in healthcare delivery, focusing on patient outcomes, quality of care and efficient resource allocation. 

While challenges exist, as health systems overcome logistical hurdles, value-based healthcare models may soon become a wider reality, offering better outcomes and experiences for the population.