Home » Michael Porter’s Value Based Healthcare (VBHC); solution or illusion?

Michael Porter’s Value Based Healthcare (VBHC); solution or illusion?

Healthcare is fragmented, the quality of care isn’t always as optimal as it should be and the costs keep rising by double digits. Michael Porters and Elizabeth Teisberg’s Value

Based Healthcare (VBHC) is seen by many as the solution to these problems. But is it really? In this blog we will show you that VBHC will only lead to even more inadequate coordination within the healthcare sector. If this model is widely implemented, people with complex health care demands like multimorbid patients and vulnerable elderly will be the biggest losers. Groups that are growing in this country. But thankfully there is an alternative based on an integrated care approach, with incentives for cooperation between professionals to keep the right kind of healthcare in the right place, supported by the latest information technology.

What is VBHC?

Simply put, VBHC is about realizing the best outcome for the patient at the lowest possible cost. In VBHC, disease-specific care pathways are the starting point. The entire process from prevention up to and including rehabilitation and aftercare including all the different disciplines involved is mapped. Data is collected and analyzed first, and the healthcare process is optimized. What VBHC actually preaches is an integrated healthcare approach where the consumer can choose the best supplier based on objective qualitative criteria.

To put VBHC into practice, Porter and Teisberg developed an implementation model consisting of six interrelated building blocks, as can be seen in the image below. That all sounds great, but unfortunately there are a few pitfalls.

Figure 1: The Value-based healthcare (VBHC) implementation model

Implemantation model VBHC English_Figure 1

VBHC: the pitfalls

The VBHC model seems better than it is on a number of points. We list the pitfalls below:

1. VBHC means (even) more competition

VBHC explicitly assumes a competitive model amongst healthcare providers based on healthcare outcomes. On the level of diagnoses and treatment of individual diseases. If you implement VBHC in detail, it will lead to full market function. You will create competition between individual providers at the conditions level. This will stimulate healthcare providers to specialize as much as they can. All we have to do is look at the US, where market function and extreme specializations have led to enormous inequality, to realize that that’s not something we should want. An Anglo-Saxon model of complete market function where healthcare is modeled based on supply and demand, does not fit within our Rhineland culture and doesn’t match the soft side that actually characterizes healthcare. Especially complex and vulnerable patient groups will reap the disadvantages. An important reason being the lack of legal and financial frameworks for an integral approach. To achieve better healthcare outcomes at lower cost for these groups, the entire network of prevention, healthcare and wellbeing needs to be taken into account and healthcare providers and insurers should work together. That is not the case in the Netherlands right now, because there are no legal or financial frameworks to facilitate it.

2. VBHC is integrated healthcare

VBHC assumes well-functioning integrated healthcare and integrated financing. While we have only actually implemented integrated healthcare for 50% in the Netherlands and we forgot to consider secondary care in the GP’s integrated healthcare financing. Is that a bad thing?

In the places that integrated healthcare is being applied in the Netherlands, we see that the costs are rising and there is only a minimal improvement on a limited number of quality indicators. There have been clear positive effects in countries like England, Germany and New Zealand. There is a simple explanation for this: in those countries, healthcare insurers reach integrated agreements with the primary as well as the secondary care providers that work together in one organizational network. Within those organizational networks, they have common quality frameworks and guidelines. That cooperation is essential, especially for patients with a complex healthcare demand.

  1. 3. VBHC means more out of pocket payments

In addition to the full market function that characterizes VBHC, it assumes a public approach to healthcare with a population-oriented approach. Regardless of your background or income, you as a patient will receive the care that you need. The regulated market function like we know it in the Netherlands, assumes a hybrid model of market function on the one hand and public (government-led) healthcare on the other. Implementing VBHC, the way Michael Porter suggests it, will lead to pure (illness based) competition model, which will irrevocably lead to more out of pocket payments for patients since value is determined on the basis of the most well-presented provider. That is what determines the price the patient pays. To ensure patients can make a well-founded decision, deductibles must go up; otherwise there is no incentive to choose the ‘best performing’ provider. International research has shown that this approach leads to inequal access to good healthcare. The American healthcare system. Healthcare systems that are based on a public approach are better equipped to protect equal access to healthcare regardless of background and income.

4. VBHC assumes a patient that makes rational choices

VBHC assumes that patients are able and willing to make rational, financially responsible choices based on objective information about quality and price; the supermarket model. Research, however, has shown the opposite. People don’t take rational decisions when it comes to their own health. They choose healthcare that is well arranged and close to home and attribute less value to the quality and cost of that healthcare. In addition, people generally aren’t fully informed or don’t have access to all the quality aspects and costs of healthcare. People find it difficult to estimate the value of the available information. Health (care), unfortunately, is a little more complex than a packet of butter at the supermarket on the corner of the street.

5. VBHC puts the disease, not the person, at the center

VBHC assumes an disease-specific integrated care approach. The disease or condition is the starting point to optimize the healthcare provision. Someone with multiple or complex conditions will end up in several care pathways at the same time if we follow the logic of the VBHC model. This has many disadvantageous consequences, like unwanted hospitalization, higher risks of mortality or polypharmacy. In other words, the dialectics of integration. This means that for people with complex and multiple conditions, VBHC will lead to fragmentation of care. Michael Porter forgot to take into account the fact that people are more than a sum of their diseases and/or illnesses when he created his VBHC approach.

What needs to be done?

Does that mean we should just throw VBHC overboard? That would be taking it too far, VBHC is not a bad method to improve care processes of low complexity within one intstitution (e.g. a single hospital or clinic). But for more complex healthcare issues, we need a broader and more scientific based approach. Think of an older patient with diabetes, heart failure and a depression that has to deal with ten different healthcare providers. This patient doesn’t benefit from integrated care, but from mutual alignment of all the care that he or she receives. Within such a (health)care network, all healthcare providers involved have their own role and responsibilities, but they work in a coordinated way and carry joint responsibility. The only question is: how do we achieve this? Thankfully there is a lot of international research on this topic and we know what the characteristics are of care networks that work. We’ll list those for you too:

1. The right care in the right place

International research has shown that a lot of healthcare is offered in the wrong places which leads to unwanted health differences and unnecessary costs (McGlyn et al. 2003). This happens a lot in the Netherlands as well (see figure 2). The biggest challenge is to offer the right care in the right place. This means the patient’s needs should be at the center and not the healthcare provision. But how do you map those needs, when your daily practice takes up all your time as a healthcare provider? By investing in knowledge development and using smart algorithms. (Casalino et al., 2003). This makes it easier to guide your practice based on your patient’s factual healthcare needs. There is a lot of progress to be made in this area, by applying the right analyses to for example GP information systems (huisartinformatiesystemen or HIS) and hospital information systems (ziekenhuisinformatiesystemen or ZIS). Unfortunately, this hardly happens in practice.

Figure 2: The global healthcare efficiency score

Global Healthcare Efficiency Score Essenburgh Research & Consultancy

2. The care network

Healthcare providers are expected to offer the best quality of care at the lowest possible price. In other words, cost efficiency. This works the best within care networks (Casalino et al. 2003). Only in a care network does it make sense on a clinical and a financial level to for example use a more expensive type of medicine which lowers the risk of hospitalization. If all healthcare providers involved work on their own, the situation will have a positive outcome for the patient and the pharmacy but hurt the hospital. To name another example: when needs change and the patient is transferred to a different care facility, it’s good to know which tests and procedures have already been executed to prevent double diagnoses. In short: if there isn’t an integrated business case for all organizations involved, competing financial interests will make an integrated approach difficult to impossible in practice.

3. Shared information

The third characteristic of a well-functioning care network is shared electronic patient files. When you have your data in order as a care organization and share it with cooperating organizations in the region, you can use smart data analyses to spot trends and predict the feature healthcare demands (Enthoven & Tollen 2004). This will lead to better regional coordination of care on the one hand and the possibility of outcome financing on the other. To achieve this, you need modern IT systems and professionals who know about healthcare and can do useful analyses based on the available data. This is easier to put into practice and finance if healthcare providers work together. Research has shown that large multidisciplinary teams are more likely to invest in those types of approaches (Audet et al. 2004).

4. Population based approach

Research has also shown that a population based approach leads to better quality of care at lower costs (Newhouse, 1994)(Enthoven & Talbott 2004). A population-based approach means that you organize healthcare at the neighborhood, regional or provincial level. You do this by using risk stratification models. By using algorithms, it is relatively easy to categorize patients in terms of risk profiles, like high, increased and low risk. You then arrange custom healthcare around these risk groups, so that healthcare providers actually offer the right care in the right place. This also leads to a more efficient use of time and resources. Because instead of planning ten minutes for every single consultation, you differentiate between the risk groups. You give low risk patients less time and high-risk patients more, which means you’ll be able to help the latter better and they probably won’t come to consultation hours as often. That way, you can offer custom care that costs less and will lead to higher patient and healthcare provider satisfaction.

Moving forward

In conclusion, we can say that Michael Porter’s VBHC concept is outdated, created by one of the many management gurus in this world. The model is useful for the internal structuring of your organization but does not offer a solution for the real healthcare issues of our time. If we were to implement VBHC all the way, this would lead to further fragmentation and less accessibility of care. Exactly the opposite of what we really need. The only right answer to the problems we are currently facing, is to work in care networks. Lots of research has shown that an (health)care network will lead to lower costs and better outcomes for everyone. So let’s quit following every management guru that comes along, but think about solutions that give the real answer to healthcare issues that are relevant now and in five years. This means integral thinking and acting instead of putting everything into more boxes and finding out in ten years that we have excluded the most vulnerable people in our society from access to healthcare. All in all, plenty to do!

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Pim Valentijn

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