In a speech before the World Health Care Congress, outgoing U.S. Secretary of Health Michael Leavitt labeled the transformation to a value-based health care environment as both imperative and the most significant financial challenge that the country has ever faced. He defined the value-based movement as "a growing collection of people, organizations and governments who believe that the value of care should replace the volume of care as the most important virtue in the way health care is paid for and consumed."

Achieving value-based health care will not be easy. The provider segment has evolved from a small, personalized, community doctor model into large, impersonal, multihospital organizations that span geographies. Costs are spiraling upward while billing practices are becoming progressively disjointed, making it difficult for the average consumer to understand pricing structures much less compare options or influence the total cost of required care. Today's model assigns little accountability for change and lacks visibility into quality, cost or efficiency.

As health care providers heed Leavitt's call to action, it is increasingly clear that BI will play a significant role in facilitating the transformation. BI provides an integrated enterprise view of data that can be used to produce key performance indicators, identify patterns in diagnosis, illuminate anomalies in processes and identify variations in cost factors, all of which facilitate accountability and visibility and can drive an organization toward efficiency. Case in point: Leavitt has called for the development of a scorecard (a traditional BI application) in order to lay out how well a hospital or doctor does on a treatment and to clearly delineate charges as a way to measure progress. Just how significant the BI role will be is illustrated in the following Health Industry Insights market predictions for 2008 from Research VP Scott Lundstrom.

  • Decision-making at the point of care or service will drive demand for real-time analytics. 
  • Knowledge-based processes will expand across the health value chain, including specific efforts supporting personalized health.
  • Pay-for-performance initiatives will drive significant IT investments in electronic information-sharing technologies.
  • Payers will increase their investments in stakeholder IT to advance collaboration across the ecosystem.

The transformation to the value-based health care vision is based on three cornerstone concepts, all of which will require integrated enterprise information and the analysis capabilities found in a BI environment.
The first is the drive to adopt a set of standard quality measures that can be used to consistently measure and manage health care organizations. A scorecard will provide both national visibility and consistency to these metrics. While the ultimate vision may be for national standards, many organizations are starting by developing baseline metrics for quality and performance that they can use to measure internally or across groups of hospitals, physicians and patient populations. Procedures per physician, length of stay and overall resource utilization are a few of the metrics that organizations are beginning to track. As these companies build out more robust BI applications, efforts will turn toward more sophisticated analyses to develop metrics around areas such as optimization of patient flow and stay durations, matching resource allocation to care delivery, and surfacing and profiling best practice diagnosis patterns.

The second cornerstone concept is a focus on health care costs. Containing costs, using data to facilitate cost comparisons across delivery systems, bundling related treatments into logical packages and providing visibility into pricing data are all components of changing focus on cost. BI will play a big role here as organizations try to understand all cost components of various treatments and use these to develop average costs for procedures such as hip replacements and heart surgeries. This may start internally, with providers consolidating the data for all the procedures they perform to reach baseline costs. However, industry-standard cost comparisons that look across providers are not far away. Payers have cost data today on myriad providers and procedures and have already pushed the issue in terms of reimbursement. The logical next step is to provide accessibility to this data to facilitate choice on the part of the consumer based on pricing and, looking forward, on quality of care. Medicare is already reporting on common costs for physicians and hospital procedures, and insurers are beginning to provide cost comparison data to their customers. As this trend continues, providers will have no choice but to focus on cost analysis themselves, particularly if their pricing is outside industry norms.

The third concept is a new look at provider payment and incentives. Changes in this area are being driven through the payer, government and regulatory environments and represent how the convergence of industry segments (e.g., the payer-provider relationship) is forcing the provider community to change. As information about quality and costs is used to develop standards for performance, providers will increasingly face reimbursement models that are based on meeting or exceeding quality and cost measures. One example of this in play today is pay-for-performance initiatives, where providers are compensated based on consistently meeting quality standards and patient outcomes rather than on volume of procedures completed. Providers that participate in this type of compensation program will need extensive information and analytics about actual costs, profit margins and efficiency metrics to set bidding levels by episode that will not exceed the industry cost standards while ensuring that performance is efficient enough to generate profit.

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