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MACRA: Value is a mathematical equation

Gallagher Healthcare :: Industry Insights
By Robert C. Hall | 10/18/2016

MACRA created a two-path payment system. Eligible Professionals (EPs), physician(s), and allied professionals can choose either the Merit-Based Incentive Program (MIPS), or the Alternative Payment Models (APMs). CMS’ stated goal for these payment options, noted from their website, is: “The MACRA QPP will help us to move more quickly toward our goal of paying for value and better care.” 

But what do the words, “quality” and “value” really mean, especially within the context of healthcare delivery? 

Carolyn M. Clancy, M.D., Director of the Agency for Health Care Research and Quality, said in her March 18, 2009 testimony before the United States Senate Subcommittee on Healthcare, “Simply put, healthcare quality is getting the right care to the right patient at the right time—every time. There are three basic dimensions to this: structure, process, and outcome.

As Harvard Business School professor Michael E. Porter wrote in his article, “What Is Value in Health Care?”, which was published December 23, 2010 in the New England Journal of Medicine (NEJAMA), “…value [is] defined as the health outcomes achieved per dollar spent.” He then went on to say that, “Since value depends on results, not inputs, value in health care is measured by the outcomes achieved, not the volume of services delivered, and shifting from volume to value is a central challenge.”

But Professor Porter’s definition of an “outcome” might be the biggest surprise. 

In the same NEJAMA article, he says, “Outcomes, the numerator for the value equation, are inherently condition-specific and multidimensional. For any medical condition, no single outcome captures the results of care. Cost, the equation’s denominator, refers to the total costs of the full cycle of care for the patient’s medical condition, not the cost of individual services. To reduce cost, the best approach is often to spend more on some services to reduce the need for others.”

As a mathematical equation: Value = Outcomes / Cost 

Professor Porter also notes, “The only way to accurately measure value, then, is to track patient outcomes and costs longitudinally.” (Remember the last part of that sentence, “track patient outcomes and costs longitudinally.” As a practical matter, this essentially means collecting data over a long time horizon, and using that data to create a baseline benchmark.)

The last sentence from the article does strike at the very heart of CMS’ goals, “Aligning reimbursement with value in this way rewards providers for efficiency in achieving good outcomes while creating accountability for substandard care.”

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