Blog post

Finding value: emerging value-based trends in healthcare

A commercial perspective on how value-based healthcare can help achieve the best possible healthcare outcomes at a proportionate cost.
Robert McGough

8 October 2021

Procurement reforms emphasising value over cost can support a move to more innovative, value-based contracting approaches that focus on improving health outcomes for all, says Robert McGough of Hill Dickinson LLP.

Healthcare professionals want to provide high-quality care, enabling their patients to achieve the best outcomes for them as individuals. Particularly for those working in publicly funded healthcare, high quality also means ensuring that the ability to access care is equal for all.

Organisations providing healthcare undoubtedly want the same things, but to achieve them, must also prioritise cost. The question is whether or how these two priorities – high-quality healthcare for all and proportionate cost - can best be combined to achieve the best possible individual outcomes required. Value-based healthcare, either procured or contracted for by healthcare systems, looks to provide a solution.

The opportunities of value-based healthcare

Value-based healthcare solutions are not one neat concept that can be packaged and presented ready to go, however this is arguably where much of their value lies.

Having been little more than bubbling along under the surface in recent years, in the UK at least, in terms of widespread understanding of what it is or what it offers, value-based healthcare is an area which now merits more careful consideration. NHS reform proposals suggest a move away from a system of payment by results/activity-based payments, towards more capitated (potentially block) payment structures around populations. This offers an opportunity for value-based solutions to form part of a strategy to improve population health outcomes while managing the cost of care at acceptable levels and incentivising different elements of the system to work together to achieve this.

Value-based healthcare solutions are not one neat concept that can be packaged and presented ready to go, however this is arguably where much of their value lies. With the right commitment and buy in, they can be tailored more closely to particular populations and their healthcare needs via data collection and analysis, and carefully developed outcome sets. Value-based solutions can range from procuring and contracting for a piece of surgical or general healthcare equipment, such as protective gloves, right up to the design of a complete healthcare pathway for a population or a chronic disease, such as diabetes, heart disease, or a mental health condition.

From a legal perspective, value-based healthcare encompasses both procurement and contracting practices, which is important as the value-based principles should flow through the two processes. It requires an agreement between healthcare suppliers and providers to align their interests, with that alignment enabling risk-sharing. However, the value concept is broader than simply contracting for outcomes, as it focuses on three elements: outcomes; other stakeholder benefits; and total cost of care.

Delivering real-world value

Cost savings are brought about not only through the input cost of purchase/delivery, but through the range of clinical, service and financial benefits that result.

The value-based healthcare approach is formed through collaboration between the range of organisations and individuals involved in healthcare provision, from the supplier and provider to individual healthcare and finance professionals, and the service users themselves. Working together, this group defines what value means for the particular opportunity and how it can be measured, developing outcome sets to do so. This level of collaboration, which needs to start when the procurement is being designed, is undoubtedly labour intensive but, if done right, will ensure that true, practical, real-world value can be delivered and understood by all involved. Cost savings are brought about not only through the input cost of purchase/delivery, but through the range of clinical, service and financial benefits that result. The labour-intensive nature of the process can be addressed through clarity of the opportunities, investment in a longer-term approach to implementation and an incremental model for putting arrangements in place.

Now is the time to consider value-based solutions

Much of the opportunity in value-based healthcare is in the collaboration and partnership that it requires, and this is a key focus of the current NHS reforms in England. Aspects of the reforms aim to remove barriers to the continuation and expansion of existing collaboration and integration between different healthcare bodies, and between healthcare bodies and local authorities, and with this, increase population health approaches. Procurement reforms discussed in the April 2021 provider selection regime consultation propose a new regime specifically created for the English NHS, underpinned by a new duty that services are arranged in the best interests of patients, taxpayers and the population. Implicit in the proposals is a shift in emphasis from cost to value, which in turn should support a move to longer-term innovative commissioning strategies that focus on health outcomes and the overarching benefit of improving these for all.

Taken together, these proposals push the door open to consideration of more innovative value-based contracting approaches. This practical opportunity brought about by the reforms means that NHS healthcare should start to capitalise more on the appetite we think is currently building in this direction through greater understanding of the benefits that value-based approaches can provide, demonstrated by joined-up data and the development of clear outcome sets.

Robert McGough is head of health commercial, regulatory and real estate at Hill Dickinson LLP. You can follow Hill Dickinson on Twitter @hilldickinson