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Value in Health Care

By: David F. Penson, MD, MPH | Posted on: 01 Apr 2022

Consumers and customers usually seek to get the highest value possible when purchasing any type of goods or service. This is particularly true in the setting of health care, where resources have become more limited with time. Value for consumer goods or services is generally defined as quality over cost. Effectively, there are only 2 ways to maximize value–one can either increase the quality of the goods or service provided or one can reduce their cost. Porter defines value in health care as positive patient outcomes achieved per dollar spent.1 To improve value in health care, therefore, one can either maximize positive patient outcomes or reduce dollars spent. These are really the only 2 avenues at our disposal to improve value.

Maximizing positive patient outcomes is the goal of most quality improvement (QI) projects and initiatives. The Michigan Urological Surgery Improvement Collaborative (MUSIC) is an example of a successful quality collaborative that has positively affected patient outcomes and improved the quality of care.2 Established in 2012, MUSIC is a physician-led quality improvement collaborative that includes most of urology practices in the State of Michigan. MUSIC is supported by Blue Cross and Blue Shield of Michigan, which is the dominant payer in the state. This partnership between the insurance carrier and the clinicians is unique and is integral to the success of the program. MUSIC has spearheaded QI projects that have reduced the rates of hospital admission due to infection after prostate biopsy3 and ureteroscopy.4 MUSIC is a shining example of how urologists can work together to improve the quality of care.

“To improve value in health care, therefore, one can either maximize positive patient outcomes or reduce dollars spent. These are really the only 2 avenues at our disposal to improve value.”

Quality collaboratives represent a “bottom up” approach to QI. There have been several “top down” initiatives that have been put in place, although it is not entirely clear if these programs truly improved patient outcomes. The best current example is the Merit-based Incentive Payment System, which is part of Medicare’s Quality Payment Program.5 To incentivize clinicians to improve the quality of their care, Medicare offers financial rewards (or penalties) to clinicians if they report on and meet various quality measures. These measures are rarely urology specific and often focus on the processes of health care delivery as opposed to patient outcomes. To this end, it’s not certain that the Merit-based Incentive Payment System truly improves value in health care, as defined above.

Because “real” QI is challenging, efforts to improve value have focused on the denominator of the value equation: cost reduction. Payers have accomplished this through a variety of methods. One approach has been to simply reduce reimbursement for common procedures or office visits. Every year, Medicare issues its final rule, which sets the conversion factor and incorporates any planned payment cuts into the fee schedule. Private payers then usually follow Medicare’s lead. While effective in reducing costs and increasing value, this approach is demoralizing for providers and at some point may result in providers opting out of Medicare or leaving medicine entirely.

“Because “real” QI is challenging, efforts to improve value have focused on the denominator of the value equation: cost reduction.”

A more nuanced approach to cost reduction involves a move away from fee-for-service reimbursement to “value-based purchasing.” Studies have shown that fee-for-service reimbursement incentivizes physicians to increase utilization. O’Neal and colleagues explored the use of in-office bladder biopsy in response to a change in Medicare reimbursement policy designed to move these procedures out of the hospital into the office.6 Using data from the 5% Medicare sample, they showed that in-office bladder biopsy increased by 644% after Medicare increased reimbursement for performing this procedure in this setting. The authors basically found no concomitant change in facility-based bladder biopsies, implying that the changes in reimbursement had inadvertently resulted in lower-value health care, as urologists were effectively incentivized to do more procedures. Examples like this one have led policy makers to explore different models of reimbursement that are not founded on the fee-for-service model.

Accountable care organizations (ACOs) have been proposed as one way to improve value in health care. These entities consist of providers (hospitals, physicians, health care networks etc) who are held jointly accountable for providing high-quality health care to a defined population of patients while controlling or reducing spending growth. Implied in this is the assumption that the ACO would be large and financially solvent enough to assume the responsibility for all direct health care costs for the patient population while being held accountable for providing high-quality care. The financial risk is effectively transferred to the ACO, removing the perverse incentives of fee-for-service reimbursement. ACOs have been piloted by Medicare with varying degrees of success.

Another proposed mechanism to control costs that may be more relevant to urology is bundled payment packages. Bundled payments capitate care based on disease episodes or time cycles. For example, a bundled payment package in obstetrics would include a single payment for all services around a normal-risk delivery, from the time of admission to the hospital through some period after. Any complications that might occur during the delivery, however, would be included in this single payment. This again transfers the financial risk to the provider, incentivizing the provider to provide cost-effective, high-quality care. This has been piloted by Medicare and currently offered by some health care provider entities to attract patients (or their health plans).

In conclusion, there will be continued and increased focus on getting better value in health care by either improving quality or reducing cost. As a specialty, it is in our best interest to take the lead in improving the value of our care. If we don’t do it ourselves through improving quality while controlling costs, the government and the payers will do it for us by simply reducing reimbursement.

  1. Porter M: What is value in health care? N Engl J Med 2010; 363: 2477.
  2. MUSIC: Program Overview. Blue Cross Blue Shield of Michigan 2022. Available at Accessed February 1, 2022.
  3. Womble P, Linsell S, Gao Y et al: A statewide intervention to reduce hospitalizations after prostate biopsy. J Urol 2015; 194: 403.
  4. Cole A, Kim T, Swarn W et al: Infection-related hospitalization following ureteroscopic stone treatment: results from a surgical collaborative. BMC Urol 2020; 20: 176.
  5. Quality Payment Program: Participation Options Overview. 2022. Available at Accessed February 1, 2022.
  6. O’Neil B, Graves A, Barocas D et al: Doing more for more: unintended consequences of financial incentives for oncology specialty care. J Natl Cancer Inst 2016; 108: 2.