Can the Move from Volume to Value be Truly Measured?

Who would have thought an app to find a ride in Nashville … and 70 other cities around the globe … could be a harbinger of good things to come for modern healthcare?

According to the nation’s most quoted healthcare economist, the kind of creative thinking behind Uber, the ubiquitous online transportation service, could also point to a new economic model to drive the healthcare industry.

Speaking on June 6 to a packed house at a breakfast briefing hosted by the Nashville Health Care Council, Uwe Reinhardt, PhD, the James Madison professor of political economy at Princeton University, discussed the future of healthcare enterprise and need for innovation. The good news is … he sees good things to come.

Reinhardt, who is recognized as one of the nation’s leading authorities on healthcare economics, has served as a commissioner on the Physician Payment Review Committee established by Congress to advise legislators on issues related to reimbursement. A member of the Institute of Medicine since 1978, he is also a past president of the Association of Health Services Research.

His visit to Nashville was two-fold with Reinhardt speaking at the breakfast meeting and later in the day with Council Fellows, the senior executives participating in the Nashville Health Care Council’s educational forum for thought-leadership and strategy around the future of healthcare. Sen. William H. Frist, MD, who was a student of Reinhardt’s during his undergraduate days at Princeton, facilitated the breakfast discussion.

Reinhardt pointed out the industry is moving toward pricing transparency and emphasized the importance of eliminating unnecessary administrative costs in healthcare to reduce the abundant waste built into the system.

“The government can be an important facilitator in this effort, but we need great entrepreneurs … like many of the people in this room … who know how the system works and can develop new ideas to make healthcare more efficient,” Reinhardt said.

He noted, “There are many schools of thought about how to effectively measure value in healthcare. This issue is compounded by the idea that each contributor – for example, patient, economist or provider – has a different definition of value in mind.”

Frist noted, “Nashville Health Care Council members represent the many different aspects of the industry — all of which are impacted by this topic.” He added, “The leaders in this community, both established and early-stage entrepreneurs, are uniquely positioned to make a difference in the healthcare value discussion.”

Reinhart said that, historically, healthcare has been a fortress. That fortress established a system in which people “shopped for healthcare like a crowd of blindfolded people shoved into Macy’s, told to buy a shirt, and billed six month later for whatever they grabbed. That’s how we’ve been buying healthcare.”

Reinhardt predicted, “That business model is not going to satisfy the young, tech-savvy people coming into the marketplace.” In fact, he observed, the time is at hand for the old guard to face “the barbarians the gate.”

He said he feels the business model will shift from reimbursement to being paid … like consumers do for all other goods and services. He pointed out this new economic paradigm could confuse and possibly upend companies that will have to change to work with the money they make rather than theoretical money they might be owed.

“The country is full of people raring to solve those types of problems,” he said, “and of talented entrepreneurs who want to change a broken system.” Reinhardt continued, “They have found something really idiotic going on and think: ‘I could develop some software or something that could eliminate this waste.’”

Frist said, “I’m a surgeon — I like to keep things simple. If we don’t know the value of a service, how do we know what quality is worth? How do we get there and how do we know the value?” He continued, “The magic of Nashville is that there are people here who can work together to figure it out.”

Reinhardt said, “We’re getting there, but we need new ideas … like Uber … something that springs out of the ground in response to a need.” He continued, “All it requires is information.”

In response to a question from the audience about what it would take to fix and improve the Affordable Care Act, Reinhardt responded, “It’s a messy baby. It can’t be replaced, but it could be fixed by abolishing the employer mandate — you should leave the employers out of it.” He added, “For a lot of low income people, Obamacare is not the real answer. What we need to do first is reach across the aisle and work together.”

In answer to a question as to whether they were ‘optimistic’ or ‘pessimistic’ about the future, both Reinhardt and Frist readily agreed they were “very optimistic.” Frist noted it often takes adversity to spur innovation. “Sometimes you need something like a recession to smack you in the face to make something work,” he concluded.

BlueCross BlueShield of Tennessee was lead sponsor for the morning event with Bass, Berry & Sims, Cressey & Company, LifePoint Hospitals, and Specialty Care serving as supporting sponsors.