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Indiana Health System Develops New Measure of Care Value

Analysis  |  By Christopher Cheney  
   November 18, 2019

The new measure compares actual spending on patient care over a 12-month period against the expected level of spending.

Indiana University Health is exploring a new frontier in measuring value in care delivery.

One of the great quests in population health is determining how to define and measure the value of care that is delivered to patients. Currently, value is often defined through quality measures rather than outcome measures.

"Currently, much of the conversation with providers focuses on the silos of risk adjustment scores and their level of participation in individual quality metrics.  What is needed in the world of managing risk in population health is a single instrument that melds risk adjustment, adherence to accepted quality metrics, and clinical outcomes," says Anthony Sorkin, MD, executive medical director of population health at Indianapolis-based IU Health.

To improve measurement of value, Sorkin and colleagues at IU Health have developed the Healthcare Economic Efficiency Ratio (HEERO), which features gauging actual spending on patient care against expected spending on patient care. HEERO is based on claims data for patients attributed to Medicare Advantage health plans or a Medicare accountable care organization.

New performance measure

The highlights of how HEERO works are as follows:

  • Actual 12-month spend divided by expected 12-month spend equals Healthcare Economic Efficiency Ratio
  • A ratio of 1.00 indicates spending at the expected level
  • A ratio of more than 1.00 indicates spending at a higher than the expected level
  • A ratio of less than 1.00 indicates spending at a lower than expected level
  • The expected level of spending is based on a calculation using a modified Centers for Medicare & Medicaid Services Hierarchical Condition Categories risk score

IU Health's HEERO program was formally launched this summer. So far, the program has focused on the efficiency of primary care physicians (PCPs) in two of IU Health's four regions across Indiana. Data is being shared with physician leaders and individual PCPs.

The key to the HEERO program is the kind of conversations that are prompted with PCPs, says Ed Lee, MBA, executive director of healthcare economics outcomes at IU Health.

"The key is the conversation that occurs with physicians. What happens most often today is there is a constant stream of people going into primary care physicians' offices telling the physicians how to practice, telling the physicians what they are doing right or wrong, and telling the physicians about new initiatives—whether they are about more accurate diagnosis coding, gaps in care, or something else. No physician is excited about that kind of conversation," Lee says.

The HEERO data provides information that can show PCPs how efficient they are compared to their peers. The HEERO information also includes data on prime utilization categories such as inpatient stays, emergency room visits, and skilled nursing facility stays, so doctors can see where spending behavior is impacting their HEERO score.

"The difference about the HEERO measure is it is more of an outcome measure rather than a process measure. So, of the patients who are attributed to a primary care physician or group of physicians, we are looking at the estimated number of dollars that those patients should spend versus the actual spend of those patients. This tells the physicians how they are doing overall," Lee says.

"HEERO is an indicator; and once physicians buy into that indicator, then they welcome having a discussion to practice differently," he says.

HEERO examples

The HEERO measure can be used to generate data about individual physicians or physician groups.

Example 1. Individual PCP:

  • PCP with 161 attributed patients enrolled in a Medicare Advantage health plan or an accountable care organization
  • Actual spend was $1.466 million
  • Expected spend was $1.454 million
  • HEERO score was 1.01

"The difference in dollar value is so minimal that it tells us the physician is managing patients well. The patients are spending approximately as much as the CMS risk score predicted," Lee says.

Example 2. PCP clinic in an IU Health administrative area with nearly a dozen clinics:

  • The PCP clinic had 372 attributed patients enrolled in a Medicare Advantage plan or an accountable care organization
  • Actual spend was $2.650 million
  • Expected spend was $2.811 million
  • HEERO score was 0.94
  • Several of the other clinics had HEERO scores over 1.00, with one clinic posting a HEERO score at 1.24

"We can conclude that they are managing their patients more efficiently than others," Lee says of the clinic that posted a 0.94 HEERO score.

Physician engagement

Although the HEERO program is in its infancy, the new metric has been well received by physician leaders and individual PCPs, Sorkin says. "HEERO allows us to get very granular with each physician, find those who are struggling, and pinpoint areas for improvement either in risk score coding accuracy or in spending behavior."

The HEERO program appeals to the competitive nature of most physicians, he says. "Every physician who has seen the HEERO data gets to see how they are performing against their peers, and they all want to get better. So, our physician engagement is through the roof. Everyone wants to see this data, understand it, and improve on the care they are delivering to patients."

Christopher Cheney is the CMO editor at HealthLeaders.


One of the great quests in population health is determining how to define and measure the value of care that is delivered to patients.

A new measure of value developed at Indiana University Health compares actual spending on patient care to the expected level of spending based on risk scores.

The new measure—Healthcare Economic Efficiency Ratio—allows IU Health to compare physician efficiency and spending patterns to identify outliers.

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