Managed Care 101 in 2010 (Part XIII-b): Sharing Perspectives - The Value Equation

March 24, 2009

"I suggest we move toward a method of payment that emphasizes value."

Sent: Monday, March 23, 2009 4:17 PM


Subject: Sharing Perspectives - the value equation

Dr. Davis.

I appreciate your perspective and I’d like to share part of mine: "I suggest we move toward a method of payment that emphasizes 'value,' defined for our purposes as a relationship of five (5) factors:



• Value increases as quality is enhanced, for example through effective disease state management (DSM) initiatives, by better patient education and/or health care coordination, by giving constructive feedback such as comparative and normative statistics with the goal of quality improvement, or as accessibility improves, even as the cost stays the same

• "Value" improves for a given level of quality or accessibility as the relative cost decreases through efficiency measures, use of protocols and guidelines and other focused approaches.

Inaugurating Health Care Reform: The Nuts and Bolts (Part I-g)” (Tuesday, February 24, 2009}

"The salience of this equation is that it tells a lot about the valences of success and failure as far as health care providers are concerned—it shows the power of all the critical factors in their logical relationships. For instance:

On Mar 23, 2009, at 4:25 PM, Karen Davis wrote:

Dear Dr. Kaplan: 


Many thanks for sending this along. As you state -- in elegant mathematics -- it's a combination of quality and cost.

Ref.: The Commission on a High Performance Health System’s "The Path to a High Performance U.S. Health System: A 2020 Vision and the Policies to Pave the Way."

From: Jeffrey Gene Kaplan Sent: Tue Mar 24 09:29:21 2009


I don't wish to belabor a point, however I feel compelled to offer that if a treatment modality is deemed cost-beneficial, but barriers to access exist, its value diminishes; thus, "value" is more than a combination of quality and cost. If quality is measured by patient satisfaction, member retention, point-of contact surveys, etc., the doctor with great bedside manner flourishes, even if he or she has poor technical quality (and as we know, most of our patients do well despite our mistakes - primum non nocere, notwithstanding.

From: Karen Davis Date: March 24, 2009 9:31:42 AM EDT

Got it -- good point.

Karen Davis, PhD, President, The Commonwealth Fund, a national philanthropy engaged in independent research on health and social policy issues. Dr. Davis is a nationally recognized economist, with a distinguished career in public policy and research. Before joining the Fund, she served as chairman of the Department of Health Policy and Management at The Johns Hopkins School of Public Health, where she also held an appointment as professor of economics. She served as deputy assistant secretary for health policy in the Department of Health and Human Services from 1977—1980, and was the first woman to head a U.S. Public Health Service agency. Dr. Davis serves on the Overseer’s Committee to Visit the School of Public Health, Harvard University; the Board of Visitors of Columbia University, School of Nursing, and is on the Board of Directors of the Geisinger Health System.

To: "Karen Davis"

From: From: Jeffrey Gene Kaplan, MD, MS