1.2 Background to value-based healthcare

One of the more important benefits of value-based healthcare is that it is associated with improved consumer satisfaction, and the evidence points to a real reduction in costs of care provision, reduced medical errors and improved health consumer satisfaction and clinical outcomes. Before exploring the important benefits of value-based healthcare, let’s examine some definitions and review available and well-subscribed theories and models.

Definition

Value-based healthcare is a delivery model for healthcare where healthcare services and individual providers are remunerated based on the consumer outcomes. The value-based healthcare model requires formal agreement with providers regarding paying providers when healthcare consumers improve their health status, when the incidence of chronic disease is reduced in the population, and when health status is improved by applying evidence-based principles to treatments and care. Value-based healthcare significantly differs from funding models such as capitation or fee-for-service, where providers are remunerated based on the volume of care delivered regardless of outcomes. Value-based healthcare is assessed by measuring the health outcomes achieved against the costs associated with achieving treatment and care outcomes.

Underpinning theory

The theories that underpin value-based healthcare come from agency theory and behavioural economics (Conrad, 2015). Conrad found these two theories had powerful implications for the design of payment systems. His review of original literature combined with applied research and empirical evidence on the application of those principles to the payment for value-based healthcare led him to the conclusion that payment contracts are ‘incentive capable’ and encourage better care at reduced costs, mitigate gaming of the health payment system and induce efficient and effective providers to participate (Conrad, 2015).

Benefits

The benefits of value-based care are lower costs, higher patient satisfaction, reduced clinical errors and better-informed patients. However, a recent scoping review of the literature by van Staalduinen and colleagues related to the implementation of value-based healthcare revealed that, after review, 62 out of 1,729 records returned in a literature search concentrated on the goals or the value for money of value-based healthcare. The review continued by identifying that none of the papers conceptualised value-based healthcare, and most did not specify how it was conceptualised in the first place (van Staalduinen et al., 2022). These researchers found that most studies concentrated on measuring outcomes and costs and failed to evaluate the effectiveness of the approach described, while few studies described the implementation strategies they used (van Staalduinen et al., 2022).

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