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The Math Of Healthcare Value

"ACOs are about improving health outcomes. 1990s style managed care was about reducing utilization."

I ran across that statement yesterday, exactly where I can't remember. I think the author is right about the different emphases but wrong to imply the terms 'outcomes' and 'utilization' could be mutually exclusive.  Doing so misses the point - which is, then and now, all about VALUE.

Let's define Value as:  [What we GET / What we PAY].

What do we GET from health care?  Outcomes. Results. Better health.  Longer lives.  Pain relief.

What do we PAY?  In total, it's [how many x how much], or [utilization multiplied by unit costs].


Value = [What we get / What we pay].


Value = [Outcomes / (utilization x unit costs)]

Maximizing value - getting more and/or paying less - requires focusing on all of the equation's elements - outcomes, utilization and unit costs.   Yes, the 1995 response to Hillarycare might have been utilization-driven, and the current response to Obamacare more outcomes-focused, but they're really just parts of the same value-improving imperative.

And so value-driven health care leaders focus on delivering better results using fewer and lower-cost resources.  The math is easy.  The rest is not.

What's YOUR value proposition?  Is it better today than a year ago?  How do you know?  How good will you need to be in five years?  What rate of improvement does that imply?  Contact me (Steve Davis) if I can assist.  (


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