Value-Based Competition in Healthcare

Read time [5 mins]

Michael Proter, the management guru in his book, "Redefining Healthcare" describes a win-win strategy of value-based competition in healthcare which is taking shape as we speak.

He says that the best way and the only way to drive sustained improvements in quality and efficiency is value-based competition. I found it interesting because I had heard about value-based care but not value-based competition until I read this book which was written back in 2006. The experience in numerous other industries tells us that this transformation is possible. It also tells us that there can be stunning progress when the right kind of competition is unleashed.

Value-based competition results in positive-sum competition in which all system participants can benefit: when providers win by delivering superior care more efficiently, patients, employers, and health plans also win. When health plans help patients and referring physicians make better choices, assist in coordination, and reward excellent care, providers benefit.

He says that value-based competition should be guided by eight principles:

1. The focus should be on value for patients, not just lowering costs
2. Competition must be based on results
3. Competition should center on medical conditions over the full cycle of care
4. High-quality care should be less costly
5. Value must be driven by provider experience, scale, and learning at the medical condition level
6. Competition should be regional and national, not just local
7. Results information to support value-based competition must be widely available
8. Innovations that increase value must be strongly rewarded

Recommend reading chapter 4 of the book where there are numerious examples of provider making strategic choices to create patient value. When a provider makes a stretegic choice of medical conditions and service lines, it feeds the virtuous circle of value in care delivery in its favor as shown below:

The combined effects of experience, scale and learning create this virtuous circle. If competition on results drive the pursuit of health care value for patients, the gain would be enormous. To do this, there are various strategies mentioned in the book. I will update this post with any interesting findings from my read.