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What Your Value-Based Care Initiative Could Learn from Its Economics Sibling

Analysis  |  By Christopher Cheney  
   September 14, 2018

There are opportunities for value-based healthcare to benefit from cost-effectiveness analysis.

The healthcare economics toolbox is maturing and playing an increasingly valuable role for physicians and administrative leaders.

In particular, cost-effectiveness analysis and value-based healthcare, which are the primary tools of healthcare economics, are intersecting and drawing valuable insights from each other, recent research shows.

The lead author of the research, Joel Tsevat, MD, MPH, professor of medicine at UT Health San Antonio, is a cost-effectiveness analyst who is calling for a convergence of his discipline and value-based healthcare.

"We have been trying to quantify bang for your buck for thousands of clinical treatment or prevention paradigms. What I realized is we have been living in parallel worlds: the cost-effectiveness analysts and the value-based healthcare people," Tsevat told HealthLeaders this week.

Timeframe is one of the key differences between value-based healthcare and cost-effectiveness analysis, he says.

"Value-based healthcare tends to look at shorter-term outcomes. Bundled payments are 90-, 60-, or 30-day episodes. Accountable care organizations are year-to-year analyses of how they are doing compared to how they did the previous year or relative to a benchmark. Cost-effectiveness analysis generally takes a long-term view or a patient's lifetime view."

At the very least, healthcare leaders need to understand the different approaches, says Tsevat, who is also affiliated with the University of Texas at Austin's Dell Medical School. "These concepts are affecting care. Value-based healthcare is affecting care more overtly now because it is affecting reimbursement."

Cost-effectiveness analysis is a crucial tool for healthcare leaders who gauge the tradeoffs between patient benefits and therapies with astronomical costs such as expensive medications. "The rubber is hitting the road. We can't afford million-dollar treatments," he says.

Physicians can no longer afford to turn a blind eye to costs, Tsevat says.

"Historically, we were taught to provide whatever care is best, regardless of cost. If the patient needs an expensive medication or an expensive treatment, the physician is trained to do that. But as providers we are also becoming stewards of the healthcare economy, like it or not."

Physicians should be trained to understand cost-effectiveness analysis and value-based healthcare, he says. "Physicians have to understand these concepts. We have to understand tradeoffs."

Converging disciplines

Cost-effectiveness analysis and value-based healthcare can draw valuable elements from each other, Tsevat says.

Cost-effectiveness analysis is generally performed from a societal perspective or healthcare sector view, and the discipline would benefit from drawing on value-based healthcare's patient-centered approach, he says.

"If you have HIV or hepatitis C, the community might place a lower rating or value on that health state than you as a patient would, because it's your life. So, cost-effectiveness analysis could learn more about individualizing outcomes at the patient level."

Tsevat says value-based healthcare could benefit from the capability of cost-effectiveness analysis to gauge tradeoffs—the costs for the benefit.

"It's all well and good to eliminate waste and low-hanging fruit such as imaging for routine back pain that has little or no benefit. But after you have eliminated waste, there is going to be point where you start making tradeoffs. There are a lot of things that we do that have a little bit of benefit, but there is a question of whether it is worth the cost," he says.

Christopher Cheney is the CMO editor at HealthLeaders.


Cost-effectiveness analysis tends to look at long-term timeframes such as a patient's lifetime.

Value-based healthcare is focused on shorter time periods such as 30-day bundles of care.

Value-based healthcare initiatives can benefit from the capability of cost-effectiveness analysis to gauge tradeoffs.

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