Introduction to Value Based Healthcare for Employers

Introduction to Value Based Healthcare for Employers

Maximize value for patients with value based healthcare. Read more at

American employers will be looking forward to another year of rising healthcare costs for their employees and dependents. Despite countless incremental solutions such as wellness programs, consumer driven healthcare, employee cost shifting, and provider payment reform there has been very little impact on both the quality and the price of healthcare for employers.

It is time for a fundamental new strategy.  At its core is a need to maximize value for patients – “value based healthcare”.  Value based care delivers the best outcomes at the lowest cost. And every stakeholder has a role to play including employees, employers, benefit consultants, providers, health plans, and innovative healthcare vendors.

So what is the primary goal of value based healthcare? To date, healthcare reform strategies have been hampered by lack of clarity in defining this goal. Limited goals such as discounted fee for service pricing or improving access to care have not delivered the proper results.  Neither improving access to poor care nor reducing the cost at the expense of quality is a desired objective.

In healthcare, the primary goal must be improving the health value to patients, where the health value is defined as the patient outcomes achieved divided by the cost of achieving those outcomes. Furthermore, these outcomes must be defined by what matters most for patients. Improving value occurs by either improving outcomes or reducing costs or ideally both.


So how do employers make the transition to value based healthcare within their organization?

Rather than manage health, employers have attempted to manage costs. Without fully understanding the quality and value differences in healthcare services, employers have bought health plans based on price. By treating healthcare services as a commodity, they have encouraged health plans to focus on short term cost reductions and cost shifting. You would think large successful corporations that are seasoned buyers would know better. Successful corporations know that all suppliers are not equal. Few products or services are actually commodities, especially a service as complex as healthcare. And that value is the determining factor on a purchase, not price.

Employers have failed utilize the same buying strategy they use for other services and products with healthcare purchasing decisions. And when a decision has been made to purchase healthcare services, senior management has failed to measure and hold their staff accountable for health results achieved from these outlays.

At the highest level, employers must use their influence to create the right type of competition in the healthcare system. They can do this in a number of key ways described broadly below.

  1. Set the goal of increasing health value, not just focusing on cost
  2. Develop a new set of expectations from health plans focusing on health results for conditions of care vs. price for each service and procedure
  3. Build employer consortiums that join forces to encourage value based competition in the provider marketplace
  4. Incentive for employees to make good healthcare decisions
  5. Measure healthcare outcomes and hold employee benefit staff accountable

By making healthcare a senior management responsibility and assigning accountability for healthcare value to benefits directors, health benefit brokers, and the health plan, employers can begin to move quickly towards a value based healthcare model which will ultimately maximize employee health and cost containment.




Author Info

Jonathan Spero

Dr. Spero is the CEO of InHouse Physicians and a thought leader in the area of cost containment solutions for self-insured employers. Dr. Spero graduated medical school from the University of California, Davis. He completed his residency in Internal Medicine from Scripps Mercy Hospital in San Diego and has practiced both internal and emergency medicine. Dr. Spero is an expert speaker on employee health care cost containment strategies, energy and performance, as well as medical risk management for corporate meetings and events. Dr. Spero resides in Chicago, Illinois.

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