Succeeding in a Value-Based

Environment
New Business Models to Thrive in the Future of
Healthcare
The Economist Intelligence Unit

EIU © 2014
getAbstract © 2014

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Take-Aways
“Value-based health care” systems that maximize “outcomes over cost” are
replacing traditional health care systems that are based on work that
providers perform.
Under the value-based system, medical practitioners earn remuneration for
the effectiveness of their work rather than the number of patients they treat.
New medications not only will have to be effective but will have to offer
better value than existing interventions.
This paradigm shift will alter health care participants’ business models:
Providers will focus on the “entire pathway” of patient care, and insurers
will seek sustainable, affordable ways to offer comprehensive health care
coverage.
Suppliers will need to come up with innovative marketing techniques to
add value to their newest offerings. Investors will find opportunities in
“health care IT systems, patient health records and data analytics
providers,” as well as industry consolidation.

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Review
Forecasts estimate that, without intervention, US health care expenditures will
rise by 5.8% annually until 2022, outpacing economic growth by as much as
one percentage point each year. The Economist Intelligence Unit focuses on a
promising approach for containing costs while also improving outcomes for
patients. Since more and more nations are opting for “value-based” methods as
the strategy of choice for health care delivery, getAbstract recommends this
fact-filled overview of the field.

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Summary
Though governments are striving to reduce spending, global health care costs
will grow by 5% annually until 2019, reaching almost $9 trillion. Several
nations, including the United States and Germany, are shifting from traditional
methods of health care to new “value-based” models, which maximize
“outcomes over cost.” A value-based approach reimburses providers based on
results rather than volume of service. As well as meeting high regulatory
standards, a value-based system requires new drugs to prove their effectiveness
vis-à-vis offerings already on the market. This method prices drugs and
treatments according to their impact. It keeps track of patients’ data, improving
transparency. A value-based approach also plans for a population’s future
medical requirements. This paradigm shift will lead participants in the health
care industry to rethink their business models:
Health care providers will feel the pinch as patients demand cheaper, more
effective treatments and regulators seek compliance with rules securing
universal access to health care. By focusing on the “entire pathway” of
patient care, service providers can gather and analyze better data on patient
outcomes and on costs, thus improving protocols and standardizing
treatment. Moreover, introducing “electronic medical records” would
streamline health care, allowing doctors to access aggregated patient data to
see what past treatments have achieved. Additionally, a value-based model
cuts costs by promoting primary and preventive care, urging patients
toward care centers and clinics and away from hospitals. “Inpatient care is
almost viewed as a last resort.”
Insurers and payers will need to discover a sustainable way to offer
adequate yet affordable health coverage. As well as paying out on claims,
insurers will act as “gatekeepers of accountable care.” Payers may venture
into partnerships with providers to form “accountable care organizations.”
On the supplier side, “blockbuster” drugs might phase out, because
pharmaceutical firms will need to justify their high prices relative to
alternative therapies. Innovative pricing strategies – such as bundling drugs
with diagnostics that find patients with the “biomarkers” that are most
receptive to a certain treatment, or offering rebates when patients don’t
improve – may prove useful in marketing new medicines.
“Health care IT systems, patient health records and data analytics
providers” will attract investors. The industry is likely to undergo
consolidation as price pressures mount.

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About the Author
The Economist Intelligence Unit is an independent research and analysis
organization.

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Quotes
“Unless we start thinking differently about the provision and focus of care, and
what it means to be in the business of health care, the current trajectory is
dangerously unsustainable.”
“‘Value-based health care’...may hold the answer to the streamlining of health
care provision that will make the dual aims of good health and universal
access.”
“Countries that have a large element of outcomes-based purchasing and
reimbursement today include the UK, Germany and the US. Nevertheless,
emerging economies can get a head start in streamlining costs against outcome,
by ‘baking in’ the concepts of value-based health care as a central organizing
feature from day one.”

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