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What Does It Mean to Provide “Value” in Health Care?

Value can be defined by the standard equation of quality divided by cost. This formula makes sense for many industries.  For example, most people would consider a well-built, affordably priced car to be a good value.  But in health care, value can be harder to characterize.  What exactly is health care "quality"? And does cutting costs result in poor quality?  These are important questions as our health care system moves away from a productivity-based system.

To provide value, hospitals should adopt the principals of quality improvement espoused by Edwards Deming in the 1950s.  Dr. Deming was a statistician who helped reinvigorate the Japanese industrial base after World War II.  He showed that the key to achieving quality is to focus on the processes of production, not the product. "Quality" is defined by Deming as the elimination of inappropriate variation in process steps.  This reduces waste, thus producing better quality. And as waste is reduced, costs go down.

One should look to Brent James and his work at Intermountain Health Care to see how these ideas translate into health care value.  For example, Intermountain used clinical process improvement to reduce surgical site infections to well below the national standards, and this resulted in millions of dollars in savings per year.

Successful process improvement requires a change in culture, and this must begin in the C-suite. Savvy leaders will decide that they are in the business of clinical processes, not administration and reimbursement. This shift in thinking will become vitally important as payments migrate toward risk-based population models.

Dr. Thomas W. Prewitt is a senior manager in health care services for HORNE LLP. He leads HORNE's efforts in health care quality improvement and delivery model reform as the first clinician to ever join the firm. For more information, contact Dr. Prewitt at tommy.prewitt@horne-llp.com.