— The only value in healthcare should be the value of a healthy citizenry
by Steven Merahn, MD November 12, 2023
Merahn is a veteran physician-executive.
George Orwell’s seminal novel 1984 introduced the concept of “doublethink”: the act of simultaneously accepting two mutually contradictory beliefs as correct. Think: “war is peace,” “freedom is slavery,” or “ignorance is strength.”
Let’s consider a new one: “risk equals value.”
The words “risk” and “value” have different meanings to patients, physicians, and payers. Years ago, as a newly minted medical director for an operating unit of a global payer organization, it took me months to realize that the word “risk” meant something completely different to my new, more business-minded insurance colleagues than it did to me, a physician and former member of a health system leadership team.
My mental model for risk was the risk of a new diagnosis, functional limitation, or the exacerbation of an existing condition. This meant the goal of “risk stratification” was to identify those most at risk for increased burden of illness or rising levels of medical complexity and offer clinical insights to the medical providers involved in their care.
The company’s model for risk was financial: identifying which health plan members were more likely to incur higher costs. Their approach to risk stratification was to identify high users of emergency department or inpatient services and deploy care managers who would work, largely independent of the medical providers involved in the members’ care, to reduce their utilization of high-cost services.
Admittedly, there is overlap: “rising risk” to a payer is often based on an understanding of a change, or potential change, in an individual’s medical complexity, and intensive care management is an effort to shape behavior based on guidelines and evidence. However, the prime objective of the payer is to avoid preventable costs, not necessarily improve the life of the health plan member. Yes, avoiding hospitalization is generally a positive thing for everyone, but simply avoiding resource utilization is not the same as health improvement.
Here is where the slope gets even more slippery:
The first wave of “value-based care” was based on “shared savings” between the payer and medical providers and was tied to the providers’ contribution to reducing utilization-driven costs and targeted performance on some “quality measures,” which are essentially evidence-based practices with known actuarial value. Known as “upside risk” because the professionals got paid fee-for-service rates with shared savings as a bonus, this was essentially a strategy to incentivize medical professionals to do the work needed by the payers to achieve their prime objective.
Payers realized they could offload even more of their financial risk to clinicians and hospitals and health systems by offering them alternative payment contracts in which they were given monthly payments or lump sums for each patient, money they could manage on their own, with more control over their profit potential if they could keep costs at bay. This is “downside” or “full” risk because if the patient ended up costing more than their allocation, the difference had to come out of the provider’s own pocket.
Many clinician and health systems were enticed by this potential but often did not understand the investments and changes required in the organizational capabilities and clinical operating model to meet these new objectives. Rather than evolving medical practice around the needs of patients, this approach to value makes medicine revolve around what are effectively business practices. For example, while there is little doubt patients benefit from recent efforts to incorporate health-related social determinants in care planning, interest in these factors was driven more by their association with preventable hospitalizations than the upstream socioeconomic and racial inequities that undermine the health of our communities.
While even under “full-risk” or capitated care there are some guardrails of accountability to ensure some care is delivered, at the end of the day, value is defined by economics, not quality of health.
The fact is the financial risk-sharing primarily creates value for payers by reducing their financial exposure; offloading financial risk puts patients and professionals in a subordinate position to the money. Current metrics of “value-based” success and quality, even those with a clinical foundation, are biased towards reducing population-level economic risks, not true person-centered quality of health.
Ultimately, the problem of healthcare costs can only be solved by determining what we want our investments in health to return.
Population health affects economic vitality directly through expanded workforce participation, enhanced labor productivity, and reduced burden of illness. But there are also indirect effects through reduced barriers to educational opportunity. The economic benefits from improving health are substantial: the economic return is estimated at $2 to $4 for each $1 invested in better health, with potential 8-10% increase in gross domestic product. There is economic value in preventing otherwise avoidable suffering, burden of illness, and disability.
With this in mind, the only value in healthcare should be the value of a healthy citizenry. Given that the vast majority of healthcare dollars come from tax rolls and industry, both government and business should focus on how their investments improve people’s capacity to participate — emotionally, socially, economically — as active members of the community.
What might this look like in practice? “Managed care” would spend money to build collaboratives to manage care, and orchestrate health, educational, and social services resources towards both person- and community-level goal achievement. Care planning should be based on a mutually agreed upon set of “future state” goals for quality of health, and care delivery focused on orchestrating the management of all the determinants of their current state towards those goals. Person-centered metrics of success would focus on whether we have enhanced quality of health by reducing burden of illness, improving functional status, reducing allostatic load, and preventing or attenuating health-related disruptions to school, work, and family life. Objective measures of community health status — such as the RWJF County Health Rankings — could become one of the gauges of success and payment.
Orwell presented doublethink as an example of how the alteration of everyday language could be used to impose subconscious control over beliefs. How we pay for care has come to dominate our national conversation, but we should not be letting that overshadow how we care and what we want that care to accomplish.
Steven Merahn, MD, is a veteran physician-executive with special experience in systems-based practice and population health management. He is currently the medical director for two New York State-based non-profit organizations dedicated to supporting individuals with intellectual and developmental disabilities. He is also the author of Care Evolution: Essays on Heath as a Social Imperative.