Hospitals

How to really measure the value in health care

Nearly two years ago, we embarked on journey into uncharted waters. We were at a moment in our history when our Exceptional Patient Experience results and UHC quality rankings affirmed that we had remarkable organizational capability, agility and capacity for change. Then, the Affordable Care Act had an uncertain future. We moved in the direction […]

Nearly two years ago, we embarked on journey into uncharted waters. We were at a moment in our history when our Exceptional Patient Experience results and UHC quality rankings affirmed that we had remarkable organizational capability, agility and capacity for change. Then, the Affordable Care Act had an uncertain future. We moved in the direction we thought made sense in the face of that uncertainty. We focused on the fundamentals—the continuous pursuit of quality and service with a stronger emphasis on efficiency, cost, and effectiveness.

Peter Drucker once said, “If you can’t measure it, you can’t manage it.” And how right he was. The School of Medicine department chairs recognized that to manage costs and measure outcomes, we needed data and we needed tools. The very next day, we called a meeting of folks in finance, IT, hospital, UUMG leadership, biomedical informatics, and others. The goal? To create a new tool that, like the Press-Ganey scores, would enable providers to view their current data, try new approaches, track progress, this time in the arena of outcomes and costs. If we were going to do it, I wanted us to do it right—to have true costs, not charges, for every diagnosis, every patient and every provider at the U. Recognizing that our focus on outcomes and costs reflected the Value equation, the team chose to call our tool Value-Driven Outcomes (VDO).

In the last decade, the challenges of health care have attracted some of the top minds in business. This is a good thing. We have a lot to learn from business models in other industries. Professors Michael Porter and Bob Kaplan, from Harvard Business School (HBS) recently teamed up to think about value in health care. Porter, renowned for his work in strategy and competition, and Kaplan a cost-accounting expert, thought leader in strategic management and co-creator of the “balanced scorecard,” joined forces to tackle health care. Their mantra? Health care must become a value-driven business that competes on value.

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One of the biggest limitations holding back progress that they identified was the reliance on charges rather than actual costs in the value equation (HBR Oct 2013). Sound familiar? By all accounts, the journey we set out on two years ago has the same goal that these Harvard Business School professors have embraced. Now our efforts are converging.

Recently, we hosted a visit by Professor Kaplan and his team of research associates from Harvard for them to learn more about our VDO efforts and for us to understand more about their approach to costing, called Time-Driven Activity-Based Costing.

The advantage of our system-wide VDO approach is that so far we’ve costed just about every aspect of care in our system: from operating room time to supplies to faculty time, even though in some instances our costs are estimates. Professor Kaplan’s approach is a more refined, diagnosis or procedure-specific method that gives us a clearer accounting of how appropriately we’re using our resources. The HBS approach takes longer, because it is built on process maps and care pathways, and helps us measure where we might have more capacity and/or could do things efficiently.

Our inaugural session this week—with a packed classroom of Harvard-Utah project leaders and participants was invigorating, validating, and ambitious. I could not have been more proud of our Utah teams and of the quality of the work we presented. And I could not have said it better than our guests at the conclusion of our day together, this is “the organization that will revolutionize health care…”