Cost vs Value
With the passage of the Affordable Care Act (ACA) in 2010, increased emphasis has been placed on “value” as it relates to medical care. The ACA established value-based purchasing, with the Centers for Medicare and Medicaid Services (CMS) rewarding hospitals based upon the quality of care provided; on how closely best clinical practices are followed; and on the ways in which hospitals enhance patient experiences of care during their hospital stay, compared with previous reimbursement models. Value-based incentives for hospitals are based upon a combination of clinical care processes, patient and caregiver experiences, efficiency and cost reduction, and clinical and safety outcomes.
How is “value” defined? We all have an idea of the meaning of value as it relates to our daily lives. Cars made in Germany are assumed to have a higher value compared with cars made in Eastern Europe. A “two-for-one” sale has more value than buying a product at the regular price. Value in its essence is preference or outcome divided by cost, or described in terms of a mathematical equation, value = outcome (preference)/cost. It follows, then, that value is increased by holding outcome (preference) constant and reducing cost, or by improving outcome (preference) while holding cost constant—and cost is only half of the value equation.
Although payers may only focus on cost, value can be increased by improvement of outcome or patient preference. To think of value in a more familiar context, value is the inverse of cost-effectiveness—whereas value = outcome/cost, cost-effectiveness = cost/outcome.
Difficulties in Determining Value
The output of the value equation, mathematically defined, can vary depending upon the viewpoint, as will be described subsequently. In addition, value as it relates to medical care is a concept that can be difficult to quantify. While it may be fairly easy to quantify value outside of a hospital or medical setting, patients may not be able to quantify value within the medical system because they do not have accurate information about the two critical aspects of value, namely outcome and cost. In general, patients who are covered by health insurance do not know the “true” cost of care beyond the cost of copayments and deductibles. In addition, cost of care may differ between two competing treatment alternatives that may not include costs related to treating complications or the cost of taking time off from work. Healthcare delivery value can be defined differently depending on the perspective of the viewer—that is, insurers vs patients.
Payer value. Payers view value as the ability of a treatment to improve outcomes while minimizing cost. An acceptable definition of outcomes can be difficult. Do payers consider factors such as overall survival, progression-free survival, or response rates? Outcomes can also be difficult to measure for payers because patients and their families can move between health plans or they can disenroll, thus making it difficult for payers to determine if a treatment has been successful or if the patient has experienced a costly toxicity. A single-payer health system, such as Medicare, would provide the necessary data to determine ultimate outcomes and the ability to compare outcomes between providers.
Patient value. Value as it pertains to patients should be the most important viewpoint, but given the difficulties with outcomes and cost, it may be the most difficult to quantify. Some view value as being defined by the customer. Yet who is the customer in the delivery of healthcare? Is the patient the customer, or is it the payer, who directly reimburses the deliverers of care? Physicians view patients as their “customers,” but what is the reality? A customer in a classic sense is the person paying for a good or service; however, in paying an insurance premium, most patients enter into contracts with payers to negotiate rates of payments. Therefore, with the exception of copays, the final payment to providers is not from patients, but from payers. In addition, patients may have various levels of copays or other out-of-pocket expenses, accounting for differences in the total cost of treatment even for similar treatments given to two different patients. Patients also may have different levels of risk tolerance for the toxic effects of specific agents or treatment approaches, thereby causing differences in outcome if measured by quality-adjusted life-years (QALYs).
One of the limitations acknowledged by the authors of the American Society of Clinical Oncology (ASCO) Value Framework is the lack of inclusion of patient-reported outcomes. Patients may view a certain treatment as having less value if they have higher associated nonmedical costs, such as travel or caregiver costs. Although these costs are not traditionally taken into consideration when calculating the overall cost of care, they are now being recognized as patients become more active consumers in deciding what treatments they are willing to undergo.
Patients may not have sufficient information about provider outcomes to fully inform a decision regarding which treatment—or even healthcare provider—to select. Unlike reports about hospitals from organizations such as the CMS or the Leapfrog Group (with the latter being a national nonprofit consortium of large employers and other healthcare purchasers, founded by the Business Roundtable in 2000 to increase the transparency of reporting about hospital care), standardized reports on outcomes of cancer treatments are not readily available for patients and their families to review prior to making treatment decisions. There are relatively few randomized trials reporting outcomes between two competing treatments utilizing different radiation treatment technologies, let alone a comparison of toxicities.
Cost is the second variable in the value equation. The critical question is: what costs should be included and collected? There are direct medical costs (cost of treatment), indirect medical costs (costs such as caregiver costs and costs incurred to attend treatment sessions), and productivity costs (eg, the cost of missing work). The question of which cost to include will depend upon the perspective of the particular group affected. If value is viewed from a payer’s perspective, then only direct medical costs would be included; the payer would not include productivity costs or indirect medical costs. The payer would not care about childcare costs incurred in order for patients or their loved ones to receive treatment. On the other hand, if value is viewed from a patient’s point of view, these costs would need to be included in the value equation, as well as the cost of health insurance premiums. The actual treatment costs would not be of concern to the patients. An analysis of value from a societal viewpoint would include all of these costs. Zheng et al, in reviewing the 2008 to 2012 Medical Expenditure Panel Survey and its Household Component data, found that productivity costs accounted for 39.3%, 32.5%, and 30.8% of medical expenditures for patients with colon, breast, and prostate cancer, respectively, who were between 18 and 64 years of age; in contrast, productivity costs were 30.2%, 25.4%, and 29.9%, respectively, for patients older than 65 years of age.
Cost, like outcomes, would be difficult to measure in the absence of a single payer, since the cost of treatment could become fragmented as patients move between payers. In addition, it is important to consider whether the cost of treating complications should also be included, given that a treatment that may improve clinical outcome may also carry high toxicity costs.
1. Porter ME. What is value in health care? N Engl J Med. 2010;363:2477-81.
2. Zheng Z, Yabroff KR, Guy GP Jr, et al. Annual medical expenditure and productivity loss among colorectal, female breast, and prostate cancer survivors in the United States. J Natl Cancer Inst. 2016;108:djv382.
3. Weinstein MC, Siegel JE, Gold MR, et al. Recommendations of the Panel on Cost-Effectiveness in Health and Medicine. JAMA. 1996;276:1253-8.
4. Russell LB, Gold MR, Siegel JE, et al. The role of cost-effectiveness analysis in health and medicine. Panel on Cost-Effectiveness in Health and Medicine. JAMA. 1996;276:1172-7.
5. Siegel JE, Weinstein MC, Russell LB, Gold MR. Recommendations for reporting cost-effectiveness analyses. Panel on Cost-Effectiveness in Health and Medicine. JAMA. 1996;276:1339-41.
6. Niederer J. A cost-benefit comparative analysis of neutron therapy versus existing radiation therapy techniques in Switzerland. Br J Radiol. 1977;50:923-5.
7. Dritschilo A, Sherman D, Emami B, et al. The cost effectiveness of a radiation therapy simulator: a model for the determination of need. Int J Radiat Oncol Biol Phys. 1979;5:243-7.
8. Hillner BE, Smith TJ. Does a clinical trial warrant an economic analysis? J Natl Cancer Inst. 1998;90:724-5.
9. Barbieri M, Weatherly HL, Ara R, et al. What is the quality of economic evaluations of non-drug therapies? A systematic review and critical appraisal of economic evaluations of radiotherapy for cancer. Appl Health Econ Health Policy. 2014;12:497-510.
10. Schnipper LE, Davidson NE, Wollins DS, et al. American Society of Clinical Oncology statement: a conceptual framework to assess the value of cancer treatment options. J Clin Oncol. 2015;33:2563-77.
11. Schnipper LE, Davidson NE, Wollins DS, et al. Updating the American Society of Clinical Oncology Value Framework: revisions and reflections in response to comments received. J Clin Oncol. 2016;34:2925-34.
12. Mohideen N, Kavanagh BD, Beyer D, et al. Radiation oncology: a perspective on health reform and value-based initiatives. J Oncol Pract. 2014;10:e212-e214.
13. Teckie S, McCloskey SA, Steinberg ML. Value: a framework for radiation oncology. J Clin Oncol. 2014;32:2864-70.
14. Donabedian A. Evaluating the quality of medical care. 1966. Milbank Q. 2005;83:691-729.
15. Jagsi R, Griffith KA, Heimburger D, et al. Choosing wisely? Patterns and correlates of the use of hypofractionated whole-breast radiation therapy in the state of Michigan. Int J Radiat Oncol Biol Phys. 2014;90:1010-6.
16. Konski A, Yu JB, Freedman G, et al. Radiation oncology practice: adjusting to a new reimbursement model. J Oncol Pract. 2016;12:e576-e583.
17. Pan HY, Haffty BG, Falit BP, et al. Supply and demand for radiation oncology in the United States: updated projections for 2015 to 2025. Int J Radiat Oncol Biol Phys. 2016;96:493-500.