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Why You Should Stop Saying “Volume to Value” in Healthcare

Recently, I was on a panel addressing healthcare trends and was asked to describe the current push for healthcare to move from volume to value. This is a fairly mundane, typical topic that I have addressed multiple times. But this time I found myself feeling (and then telling a somewhat chagrined moderator) that it is a silly question and that the phrase “volume to value” has been worn out and lost its meaning. I probably won’t get invited back to that meeting, but it made me start to wonder: What does “volume to value” mean and why do we keep using the phrase?

Don’t get me wrong, I have been in this dialogue long enough to understand the proposed purpose of the phrase and its reference to a more enlightened approach to paying providers. I understand that this is how we “save healthcare” and achieve the “triple or quadruple aim.” I understand that the phrase refers to Accountable Care Organizations in all their varieties and bundled payments and even to “value-based purchasing.” I also know that we believe that the existing incentives are off and that by changing the incentives built into the payment of healthcare, we can improve the health of our population.

   
OMTEC 2018


Chicago | June 12-14

Dr. Mark I. Froimson, a surgeon executive
and thought-leader on value-based healthcare, will provide guidance at OMTEC® 2018 on what’s driving hospital decisions for products and services and the impact on device company price and value.

 
       

Granted, the phrase has a ring to it, and on the face of it sounds directionally correct. I mean, who wouldn’t want to report to their board or to the public that we are on this noble journey from a system with seeming nefarious intent to one based on high ideals. Certainly, we must have a strategic plan—if everyone agrees that the path to virtue leads away from volume and toward value, then all we need to do is to convince our stakeholders that we know how to navigate that path better and faster than everyone else.

And, true confessions, I have been guilty of using the time-worn phrase “volume to value” more than I care to admit. As I look back, it may have been used at some point to jumpstart a way of thinking or to stimulate debate. Now, all I see is a phrase so overused that it is devoid of meaning. It has become a catch-all for anything that seems “transformational” (another misused/overused term, but we will save that for another day).

Look, I know this is heresy. Almost every healthcare CEO I know is singing from the same song sheet on this one. And they are backed up by an army of consultants selling them advice on how they can get there faster than their competitors.

It is just that it represents an unhelpful indictment of the current system and presents a false dichotomy that hinders progress.

Further, it lacks integrity and is used as a matter of habit and without clear intent of meaning. At times, it is used pejoratively to deride providers who are assumed to be after financial returns that accrue from volume, while implying that they have deliberately or unknowingly underperformed on value. At other times, it is merely used quixotically to aspire to some undefined and ambiguous ideal future state. As a result, it has become a distraction. I believe we need to move on to more productive language.

Both volume and value are important metrics of any business; saying you are moving from one to the other would
make no sense in any other industry! Period.

Recently, I was buying dinner at Panera and noticed that they have been on a journey to increase the perceived value (and taste) of their product by eliminating artificial ingredients. But I would be willing to bet that they are not trying to reduce the volume of great meals they sell. Doesn’t Apple want to sell more iPhones even as it makes each generation better (more valued) than the previous model? Companies routinely strive to increase the value of their offerings and expect in return to be rewarded with increased market share (volume) or even the creation of a new market altogether.

Please don’t protest that “healthcare is different.” (We can have that argument later if you like, but before you go down that road, be prepared to tell me why healthcare is more essential than food, shelter or clothing.)

“Volume to Value” is just the wrong description of what we want to achieve.

When we are speaking of necessary changes to our business model, what we are actually referring to
is changing our mix of product and service offerings.

Just like any other business, there are offerings that have run their course and no longer provide the value that they once were perceived to provide. When that is the case, we should replace them with something better, something that the end user (the patient) prefers and is willing to pay for. One example in total joint replacement is the use of skilled nursing care after hospital discharge; this is largely replaced by home care or self-directed exercise. Again, Apple doesn’t sell very many iPods anymore and Netflix doesn’t send DVDs primarily by mail anymore. But if you ask either whether their pursuit of their newer, high-value offerings (iPhones and streaming video) meant a move away from volume, you would surely get some puzzled looks.

There is a rich history of progress in medicine based on the continuous quest to do better and deliver for our patients,
and our current era is seeing tremendous gains in what is possible. Providing value to patients has always been, and will always be, the true heart of medicine.

The supposed flight from volume makes no sense. There are plenty of services that we would like to see grow in number. We want more well-child visits, preventive services, behavioral health/addiction care, genomic therapy, digital access/telehealth, outpatient/home services, timely advice and convenience. Perhaps we want more health promotion, more fitness activities and more focus on social factors that matter to our health. And, as patients, we expect the attributes of these burgeoning services to improve over time and be delivered with improved service, reliability and convenience. We want to know more, and for the teams caring for us to have more information about us, when they need it. What we are saying is that we want an evolution and improvement in care. We don’t necessarily want less.

Our goal should continue to be to improve outcomes and experience for the greatest number of patients possible by providing them with the types of care and experiences that they want and would pay for.

The real issue is not volume at all, but rather price. In almost every other industry, the price of a good or service
is the way buyers and sellers come to an agreement on its value.

Further, in most rational markets, as the volume (supply) of services produced goes up, the relative price goes down. Our current healthcare model does an extremely poor job of providing a market and information for pricing care. We should not be surprised that patients have no signals to discern differences in the value of care among providers. In fact, we essentially have a fixed pricing model for Medicare and Medicaid services with providers paid a set amount and patients unable to use their purchasing power to reward higher-value providers with higher price points.

It only seems logical then that improving the perceived value of the care we deliver will require a thorough rethinking regarding how care is priced in the market place. And in the end, if care is properly priced and is seen as providing value to patients, we should expect a rise in demand, and yes, more volume. So perhaps instead of some imagined journey from volume to value, we should simply recognize that it is the price attached to something that reflects its value to the market and determines the volume of demand for it.

Providers who are serious about conveying the value of their care should price it fairly
and should be ready to satisfy the ensuing demand.

For what we are really after is enough high-value care, priced to convey that value, which also satisfies our patients’ demand for it. No more, and certainly, no less.

Mark I. Froimson, M.D., MBA is President of American Association of Hip and Knee Surgeons and Principal at Riverside Health Advisors. Dr. Froimson originally published this article on LinkedIn. He will speak on this same topic during the Keynote Address at OMTEC® 2018.

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