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Calculating Value as the Primary Economic Measure for Our Field
Value is a crucial economic idea in healthcare. It frames healthcare costs in relation to clinical outcomes. Economists argue health systems should be competing to improve value rather than just reducing costs. We need to show how we improve health outcomes for each dollar spent. A new value index for behavioral healthcare can facilitate this and serve as the third metric in our triple aim.
Behavioral healthcare is handicapped in pursuing this goal today because outcomes are not routinely measured. Measurement-based care (MBC) is gaining increasing support, but we will lag the rest of healthcare until outcomes routinely inform care. MBC will make evaluating the value of our programs and services possible, but we will still need an index number to represent the value dimension.
Multiple Definitions of Value
Value in healthcare has been defined in a few ways. Value-based care (VBC) is one of the most common uses of the value concept in recent years. However, VBC’s definition of value is distinct from the one used here.
VBC describes a group of strategies for containing healthcare costs. It is generally risk-based contracting in which payers leave many utilization decisions to providers, often with several specialties and types of care included. Quality is often incentivized as a supplemental issue.
The definition of value in VBC is common. Just as a “value meal” charges a total cost for the meal rather than each item, population care can be billed as a total cost rather than separate fees. Getting “more for your money” means getting more of the product (e.g., care) based on such pricing, but it does not ensure getting more of any associated outcomes.
Components of a Value Index
Value, as defined in the value index, regards clinical outcome as a core component, not a secondary one. A value index simplifies comparisons that are otherwise complicated by using standardized components. For example, if we define value as a ratio of outcome and cost, we need numerical units for each. Cost has a dollar unit, while research studies measure outcomes in effect size units.
Effect size is a statistical measure of clinical change. It calculates results in a uniform way to enable comparisons. For example, a study may report a 20% improvement based on a specific sample size and measurement tool. The goal is to compare results in a standard way, given the differences among studies. Effect size permits such comparisons. It is expressed numerically as a decimal, with a full unit being 1.0.
The ultimate goal is to compare products and services that produce clinical improvement. They must be compared around a standard purchasing price, such as improvement for every $1000 spent. In practical terms, a value index is a standardized measure of something we should be discussing routinely in healthcare. What amount of clinical improvement can be purchased for a given population?
Value Index at Work
The value index equation consists of three terms, and it uses basic math:
Effect Size ÷ Intervention Cost × 1,000 (hypothetical purchasing amount)
Consider an example using the outcome for psychotherapy in the research literature—an effect size of 0.8 on average—and assume each therapy episode costs $450 (purely hypothetical). The calculation is as follows:
Effect Size (0.8) ÷ Treatment Episode Cost ($450) × 1,000 = 1.8 Units of Clinical Improvement
Value is synonymous with units of clinical improvement. It is possible to increase value by increasing effect size or decreasing cost. For example, imagine you find a new clinical group, and their effect size is 1.2. The value index jumps to 2.7 based on this increase in effect size.
This increase in effect size is impressive. One way to see this is by considering another way to achieve a value index of 2.7. In other words, if the effect size stays the same at 0.8, how much would the cost of care be reduced to retain a 2.7 value index? The cost of care needs a dramatic decrease to reach a 2.7 value index. The cost of a treatment episode must drop from $450 to $300 to match the value!
Value Index and Triple Aim
What does this example tell an executive? We should try to increase the effect size for a provider group rather than reduce compensation. Fortunately, we can readily do this. We can improve outcomes using measurement-based care. Improvement often hinges on how complex cases are handled. MBC helps clinicians enhance or reframe care when warning signs show treatment is off-track.
This approach reflects the power of the triple aim in that we have three interdependent priorities for improving behavioral care, each impacting the other. The third aim related to value adds an economic metric. It is more informative than a strictly financial measure. It puts healthcare costs in the proper context and asks executives: How much clinical improvement are you producing for each dollar of intervention?
Ed Jones, PhD, is currently with ERJ Consulting, LLC and previously served as president at ValueOptions and chief clinical officer at PacifiCare Behavioral Health. Jeb Brown, PhD, is president of Center for Clinical Informatics and co-founder of the ACORN Collaboration.
The views expressed in Perspectives are solely those of the author and do not necessarily reflect the views of Behavioral Healthcare Executive, Addiction Professional, the Psychiatry & Behavioral Health Learning Network, or other Network authors. Perspectives entries are not medical advice.
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