Measuring Value-Based Care: A Q&A with Robert Kaplan

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Value-based care. What does it mean - and how can it scale within the healthcare market? It’s a major conundrum. The importance of driving value over volume can be seen by anyone who has gone to a physician and been asked to get new “labs” or new scans done.

My grandmother, for example, had back pain a few years ago. She explained to me that she was getting a “nucular” test. She had the scan done three different times by three different physicians. Medicare covered all of the tests. It is no surprise that healthcare leaders are driving toward reimbursements, and for that type of duplication not to happen.

I spoke with Robert Kaplan, Ph.D., M.S., Senior Fellow and Marvin Bower Professor of Leadership Development, Emeritus, HBS, about his important work with value-based healthcare.

According to Kaplan, to prevent these outcomes, it’s imperative that we start at the foundation of healthcare--a basic understanding of what needs to be done and how much that costs. Dr. Kaplan is leading an aggressive value-based care project with the American College of Surgeons to develop a measurement tool for hospitals. Our dialogue has been lightly edited.

J.S.: What does your program, ACS THRIVE, stand for - and what will it accomplish?

R.K.: THRIVE (Transforming Healthcare Results by Investing in Value and Excellence) is a major transformation within healthcare, and it is great to have a collaboration with the American College of Surgeons working together. We aren’t just writing papers and giving speeches; we actually want to work with the pilot organizations to implement the concepts. We want to show how to deliver the care.

We want healthcare organizations to get ready for bundled payments, so that they get a single payment for successful delivery of care. That’s the way we buy just about every product. It’s only in the healthcare field that you get a dozen or two dozen bills. A bundled payment is ideally contingent upon achieving good outcomes with the patient. Healthcare organizations aren’t ready to offer bundled payments as comprehensively as they might like.

We don’t have the outcomes of accountability.

If you think back, it seems obvious that health outcomes are difficult to predict, as is the cost of care delivery. It’s harder to measure the outcomes in health than it is to produce a Toyota: Toyota can control the input specifications of their cars, but we cannot control patient lives.

J.S.: Why isn’t value-based care happening faster?

R.K.: There is significant literature about value-based healthcare, including listed resources and many publications describing the approach so other healthcare leaders can learn. Part of the collaborative project with the American College of Surgeons will involve knowledge sharing and teaching. We intend to speak at events, and interested leaders should consult the literature.

The exciting thing about the project is the ability to put it into action with the sponsorship and the leadership of the American College of Surgeons so that we can improve the concepts to scale it more rapidly.

There are two missing elements whose absence is a primary reason why we still don't have value-based healthcare today. First, we have missing measurements. We aren’t measuring all the outcomes we should be. Secondly, we don’t know what the costs are for treating the patient. Understanding those two elements is fundamental for value-based healthcare to improve outcomes at a lower cost.

The predominant payment model of “fee for service” doesn’t motivate clinicians or hospitals to move to value-based healthcare, because when they don’t solve a patient’s problem, they get to do tests again and again (and get paid in the process); the model effectively rewards ineffective care. If you don’t solve the patients’ problem you get to do it again, and you get paid again.

We need a better aligned payment model. That’s what the project will look like.

J.S.: The foundational problem of healthcare today is an accounting problem. Is the partnership between Harvard Business School and the American College of Surgeons creating a healthcare IT tool?

R.K.: We don’t have an off-the-shelf tool we will be working with spreadsheet type programs. The costing data don’t exist; we have to create it through design work. There will be tools--some of it will be tablet-based--but by-and-large this is not a systems project. This is a project to develop some of the conceptual tools and analytics tools to measure outcomes and costs, and this pilot project to select the measurement and tools will allow the college of surgeons to scale a better healthcare delivery process.

Around 1900, when all the pressure was on the automobile companies to make cars, Henry Ford started developing lean manufacturing techniques. The foundation of success is built on understanding the process. Automating a production process that we don’t fully understand will only create crappy cars faster.

J.S.: How does the ACS THRIVE project impact physician burnout?

R.K.: It’s not a central part, but it is a byproduct. We intend to address the problem simply-- by not having physicians measure things that are not essential to better outcomes. It will take away all the frustration; The goal should be to have physicians do things that physicians can do--not things that others are frankly better at doing. Have physicians concentrate on the tasks that they went to residency to do, and a side benefit will be that physician satisfaction will go up.

This will be more team-based work. Part of the foundation for value-based healthcare is to organize multidisciplinary teams so that the surgeon is supported by behavioral and social service people. Everyone involved in the care team is focused on helping the patient.

J.S.: Within the scope of THRIVE’s work with the American College of Surgeons, how are they accounting for patients with multiple chronic conditions or other complications that will impact care delivery?

R.K.: In healthcare, patients come in different sizes--some are old, young, have chronic conditions. The outcomes you can achieve vary as a function of risk factors. Part of this is to learn to adjust for the risk of each patient. The multitude of factors that can impact health such as age, obesity, substance abuse, and the like will be addressed. We want to be able to treat all the patients with appropriate accountability. We need to understand patient lives in order to do that. This can include what is known as Social Determinants of Health (SODH) as well. Individuals with poor housing and nutrition or live alone--they won’t have the same outcomes, and they might cost much more.

If you think about the power of today's hardware, we have 350 million people in the U.S. and Europe, and if we could collect outcomes and cost information, we would be able to statistically adjust. We could understand how each factor will adjust risk. We won’t have thousands of risk buckets, which would be necessary for a completely accurate prediction of individual cost. You can classify a patient by number 1-5 and look at the outcomes that are expected. Risk can be accounted for. You could adjust it down according to the expectations. We don’t want to discourage clinicians. We don’t want people to be making money on otherwise healthy adults. With our project, we will ask, “What are the extra resources required to treat those conditions?”

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After speaking with Kaplan, it’s clear that the ACS THRIVE partnership will gather important information about measuring outcomes that matter. The recent theme of value-based care has been consensus and communication. Communicating the value and outcomes that each stakeholder in healthcare needs is imperative. Patients, physicians, payers, and care coordination with other services is part of the important work of Harvard Business School and the American College of Surgeons. We need to understand the financial costs and processes in order to improve value for everyone involved in healthcare. Our broken healthcare system is built on a faulty accounting system, and projects like ACS THRIVE will help improve our understanding of the outcomes we want.

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