The value-based hospital: a game-changer for the healthcare industry

Healthcare providers all over the world face an extraordinary combination of pressures. Despite decades of cost containment and other operational-improvement initiatives, costs continue to rise, putting unrelenting pressure on hospital budgets.

The tight management of budgets and clinical processes is further complicating already complex organisations, leaving staff demoralised and disengaged. At the same time, markets are becoming more competitive.

In response to these pressures, a few pioneering organisations are developing a new operating model – the value-based hospital. Designed to put patients and their outcomes at the centre of its operations, the value-based hospital relies on the engagement, leadership, and cooperation of its clinical community. This in turn makes possible a more constructive interaction between hospital management and clinicians as they take joint responsibility for the delivery of cost-effective, quality care.

The starting point of a value-based hospital is a commitment to collect and share data on the actual health outcomes, which is key for any organisation to better understand its true performance and what kind of value it is providing. Focusing on outcomes also provides both administrators and clinicians with a whole new way to think about costs: whether the costs incurred actually contribute to outcomes.

Costs that matter to patients
By definition, health outcomes are specific to a given disease, medical condition or procedure. The outcomes that matter vary by patient group. Similarly, the costs that matter in the value-based hospital are the costs per patient to achieve the target outcomes for a given disease or condition.

Therefore, the right way to track costs is not so much by each specialised unit but by the activities undertaken and resources used for a given patient group across the entire care-delivery process. This is the best way for an organisation to identify which particular costs drive quality outcomes and which do not.

The power of clinician engagement

Only by engaging the clinical community – up and down the hierarchy and across the entire care-delivery chain for a given disease or condition – can a hospital begin to break down the organisational barriers between departments in order to truly collaborate and share knowledge and ideas for improvement.

The combination of new visibility about outcomes and costs per patient group with across-the-board engagement on the part of clinicians creates the context for a new kind of behavioural dynamics in the hospital. Basically, it makes it possible to align the clinical goal of delivering high-quality care with the managerial goal of delivering that care as cost-effectively as possible.

Developing sustainable competitive differentiation

Hospitals must establish their competitive differentiation in the rapidly changing health-care marketplace. By competing on outcomes, a hospital can attract more patients, generate better economics, and develop a sustainable response to the trends that are transforming healthcare.

In some cases, a provider organisation will focus on becoming an international leader in treating a specific condition that often requires highly specialised care – for instance, prostate cancer. Providers that use this strategy leverage their depth of experience in clinical-practice reserach and development, excel at systematically driving outcome improvements that matter for patient groups and increase volume by attracting new patients who want the highest-quality outcomes.

In other cases – for example, chronic diseases such as diabetes or congestive heart failure – providers will strive to become integrated-service institutions that take responsibility for the entirety of patient health in a given population across primary, secondary, and in some cases tertiary care.

The integrated providers will manage the population for maximum health-care value and will, to a large extent, manage their own integrated care chains. But they will also act as brokers, helping their patients navigate to the best independent providers, which align their approaches with the integrated providers’ systems and offer unique capabilities.

All in all, what is important to note is that a hospital does not need to have all the data and systems in place to see value-based results. Simply bringing together the right people, who are committed to improving patient outcomes, in a structured process can lead to significant improvements.

Jad Bitar is partner and managing director at BCG Middle East and Rami Rafih is project leader at BCG Middle East