3 Steps to Build Your Hospital’s Value Case

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The healthcare industry is in the midst of a revolutionary upheaval reflecting the concerns of patients, payors, providers and policymakers over spiraling costs, lagging quality and lack of transparency. In this time of heightened sensitivity by all parties to the value received and the cost incurred, it's essential that you be able to differentiate yourself from others in the market. Those providers able to demonstrate economic and clinical value will gain a competitive advantage.  

The case for economic and clinical value

In its most basic form, an economic and clinical value case is a narrative that explains the comparative value provided by a delivery organization to prospective buyers or users (payors, employers, physicians or patients) in terms of criteria that matter to that stakeholder audience, and which can be backed up by data. It provides a rationale to payors or employers for contracting with one provider organization over another, to physicians or patients for choosing one facility over another. It also serves as the justification for price differentials between otherwise comparable organizations.

Although many provider organizations have historically relied on morbidity and mortality statistics to describe the value of their services, these variables, while necessary, are no longer sufficient to make a compelling value case. As regulators and the public increasingly demand better quality at lower cost, a more sophisticated narrative that integrates clinical outcomes and economic value will be required.  

Building a value case

Building a value case can be broken down into several steps.

1. Determine the economic and clinical value factors relevant to target audiences. The hospital must look through the lens of its target audiences to determine what each one values. Employers, for example, may value a provider organization for its cost structure, for the quality and variety of physicians, for the range of services available, for administrative efficiency, and for its outcomes — especially in relation to other options. Research utilizing focus groups and one-on-one interviews with members of the target audience should be conducted to generate and validate hypotheses about what really matters to key stakeholders. Recognize too that, given the dynamic changes taking place, the relative importance of various value criteria are not static. As the market becomes more sophisticated and the competitive landscape changes, ongoing market research will be needed to ensure that your understanding of stakeholder decision making remains accurate.  

2. Develop claims for each dimension of value. Once dimensions of value have been determined, the organization must choose those dimensions on which it is best suited to pursue competitive differentiation. Considerations include the organization's strategic strengths, the state of the competitive set and the difficulty of building a data-based case. The next step is to identify specific claims that differentiate it within the marketplace and develop data-based support for them. For example, let's say that quality of life throughout treatment is determined to be a critical value dimension to patients. An organization that has been collecting patient satisfaction and symptom data already is better prepared to take such a claim to the marketplace than competitors who have no such data. The organization's objective should be to develop multiple claims offering the most competitive value within the dimensions of value identified for each target audience.  

3. Evaluate claims within each dimension of value. Developing multiple potential claims for multiple stakeholder groups can present an intimidating and expensive course of action. Before launching into the work of building a data-based case for each claim, evaluate the list of potential claims against several criteria to ensure the greatest payoff for the resources involved.

First, it's important to estimate the cost and time requirements for building the case for the claim. Can data be obtained directly from the electronic medical record or will a chart audit or long-term data collection be needed? If the claim involves contrasting the provider organization with a competitor, how will competitor data be obtained? Research costs involve both time and money. Claims that are more expensive and take more time for you to complete may be deferred in favor of claims that are less expensive and take you less time to justify. In the long run, claims that address the care continuum will be the most impactful.  

In addition to cost, the potential impact each claim would have if developed must be a consideration. This involves evaluation of competitive landscape. Before making any investment to substantiate a claim, you'll need to identify market gaps: What are your competitors not saying? Can your organization fill that need? Can you make a stronger argument?

Provider organizations also need a firm understanding of the barriers to entry for other organizations wishing to develop similar claims. Claims that can easily be replicated by competing organizations are relatively weak. Claims for which competing organizations would have to reorganize processes or that would require them to conduct significant, long lead time research are significantly stronger.  

Finally, consideration should be given to the potential for synergy across stakeholder groups of a given claim. In some cases, the value of a particular claim may be high for all audiences (as is often the case with claims involving costs). In other cases, the value of a claim may be high only for one particular audience.  

Such deliberations are necessarily estimates and represent some level of subjectivity, but a consistent methodology based on experience and the right inputs is still the best guidance for making strategically informed decisions. 

The time to make the value case is now

Stakeholders across the healthcare industry are demanding better care, lower costs and more transparency. Building a value case forces an organization to address all three of these concerns. Those providers seeking to anticipate future changes in the healthcare market would be well advised to start now. Although many see change as just beginning in the market place, the research required to justify value claims may involve a significant investment in time and/or resources. Provider organizations that want to remain market leaders can't afford to take a "wait and see" attitude in the current healthcare environment. Building a value case is a critical task and the time to act is now.

Michael N. Abrams., MA, is managing partner at Numerof & Associates, Inc. NAI is a strategic management consulting firm focused on organizations in dynamic, rapidly changing industries. For more information, visit www.nai-consulting.com.

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