THE VALUE
OF THE VALUE CONCEPT
IN HEALTHCARE
Theo Poiesz
HCCA
Aruba
June 2, 2015
What value does your organization provide?
Me:
Value?
BM:
Yes, value.
Me:
What do you mean: financial value?
BM:
No, value.
Me:
Value like in ‘company values’?
BM:
No. Value like in ‘the reason for my organization’s
existence’
Me:
‘What are you, some kind of academic?’
BM:
‘I will answer that question, but you answer first.’
Me:
‘Go bother someone else.’
BM:
Providers exist because they deliver value.
Is the concept of value valued accordingly?
SET-UP
1.
2.
3.
4.
5.
Value: its position in theory (4 basic notions)
Value’s fate in healthcare practice
Reasons for concern
Implications
Conclusions and recommendations
VALUE: 4 BASIC NOTIONS
Theory
The value concept
√
The value cycle
√
The anatomy of value
√
Types of value
√
Practice
THE VALUE CONCEPT
Quality
(or quality – costs)
Value =
Costs
(See also Porter & Lee, HBR, 2013;
Kaplan & Haas, 2014)
THE VALUE CONCEPT
value
t
THE VALUE CONCEPT
value
quality
t
THE VALUE CONCEPT
value
quality
costs
t
THE VALUE CONCEPT
value
costs
t
THE VALUE CONCEPT
value
quality
costs
t
THE VALUE CYCLE
Provided
value
Resources
to invest
Customer
value
Willingness
to pay
Provided
value
Resources
to invest
Customer
value
Willingness
to pay
THE VALUE CYCLE
Customer
value
CUSTOMER VALUE
Because of its pivotal function, it is vital to know and
understand value from the customer perspective:
perceived/experienced value (differentiated).
THE POSITION OF CUSTOMER VALUE
SOCIETAL VALUE
CUSTOMER VALUE
PROFESSIONAL VALUE
ORGANIZATIONAL VALUE
THE POSITION OF CUSTOMER VALUE
SOCIETAL VALUE
CUSTOMER VALUE
PROFESSIONAL VALUE
ORGANIZATIONAL VALUE
CARE
THE ANATOMY OF CUSTOMER VALUE (1/2)
INPUTS
CV measures
PROCESSES
Customer value
OUTPUTS
CV results
OUTCOMES
THE ANATOMY OF CUSTOMER VALUE (1/2)
INPUTS
Investments of time, money and effort
PROCESSES
Alignment of activities over time
OUTPUTS
Satisfaction data, medical stats
OUTCOMES
Contribution to well-being, vitality,
productivity, QoL, HLY
THE ANATOMY OF CUSTOMER VALUE (2/2)
Quality + Comfort + Positive emotion
Value =
Fin.costs + Non-fin.costs + Neg. emotion
(Value is more than mere economic value;
Value is different from value as in ‘norms and values’)
THE ANATOMY OF CUSTOMER VALUE (2/2)
Quality + Comfort + Positive emotion
Value =
Fin.costs + Non-fin.costs + Neg. emotion
Objective – subjective (perceived)
4 Levels
CUSTOMER VALUE PROFILE
+
Value =
-
IN SHORT
Value relates quality to costs and vice versa
There are different types of value
Customer (perceived) value is a critical one
It consists of several components
All of these notions are very important in healthcare
policy making.
Self-evident?
What is the fate of the value concept
in the practice of healthcare?
VALUE: 4 BASIC NOTIONS
Theory
Practice
The value concept
√
The value cycle
√
Types of value
√
The anatomy of value
√
CUSTOMER VALUE
2 meanings:
1. The value of the organization’s care for the customer
(Often implicitly assumed)
2. The value of the customer for the organization
(Often stated in concrete financial terms)
QUALITY IN CUSTOMER VALUE
a. The quality you provide to the customer
(‘I just know that we provide quality’)
b. Quality as perceived/experienced by the customer
(‘eh … eh … quality??’)
HEALTHCARE VALUE
Quality
Value =
Costs
THE NEGATIVE VALUE CYCLE
Provided
value
Focus on cost
reduction
?
Focus on cost
Provided
value
Focus on cost
reduction
?
Focus on cost
THE POSITION OF CUSTOMER VALUE
SOCIETAL VALUE
CUSTOMER VALUE
PROFESSIONAL VALUE
ORGANIZATIONAL VALUE
CARE
THE ANATOMY OF HEALTHCARE VALUE
Quality + Comfort + Positive emotion
Value =
Fin.costs + Non-fin. Costs + Neg. emotion
(Patients)
CUSTOMER VALUE PROFILE
+
Value =
-
THE ANATOMY OF HEALTHCARE VALUE
Quality + Comfort + Positive emotion
Value =
Fin.costs + Non-fin. Costs + Neg. emotion
(Insurance companies)
THE ANATOMY OF HEALTHCARE VALUE
Value = Price
(Insurance companies)
CUSTOMER VALUE PROFILE
+
Value =
-
EXCLUSIVE FOCUS ON COSTS
value
quality
costs
t
EXCLUSIVE FOCUS ON COSTS
value
quality
costs
t
VALUE ASSUMPTIONS
Value relates to customer outcome.
Healthcare providers tend to confuse value with
Input:
‘We provide value because we invest a lot’
Process: ‘We . . . because we are well-organized’
Output:
‘We . . . because our customers are satisfied’
CONCLUSIONS SO FAR
Tendencies in healthcare:
Value is undefined, and so is quality. Implicitly assumed.
Costs dominate the value concept, to the point that
quality is forced out of the equation.
If quality is defined, it is only in an absolute sense.
CONCLUSIONS SO FAR
Tendencies in healthcare:
If value is defined in a relative sense, it is only in terms of
meeting formal requirements.
If both quality and costs are considered, costs dominate.
If both are considered important, they are considered
separately, not simultaneously.
CONCLUSIONS SO FAR
In healthcare, the value concept as a key concept is
either unknown, neglected, ignored or misunderstood.
Value is undervalued.
This is particularly true for customer (patient) value.
Who cares and why?
RISKS AND IMPLICATIONS (1/3)
The value spiral reverses.
Value comparisons are only made to copy other
providers, not to stimulate innovation. The risk of
standardization.
Cost-thinking is a trap that deepens over time.
Unclear healthcare value may affect customer trust.
RISKS AND IMPLICATIONS (2/3)
Cost thinking leads to a focus that is disproportionately
internally, operationally and short term oriented.
Changing roles and importance of value components
result in ineffective and inefficient policy discussions.
If value is unspecified, the organization’s position and
strategy are unclear.
RISKS AND IMPLICATIONS (3/3)
Lack of insight in the anatomy of customer value leads
to unclear, wavering priorities and to ineffective allocation
of resources.
The professional’s evaluation of provided care may
deviate from that of customers.
Healthcare quality evaluations often involve baseline
(required) quality, not added quality.
A strong operational focus of healthcare providers.
CONCLUSIONS (I)
Progress (+/-) in healthcare orientations
Production:
Supply, volumes, turnover, numbers
Cost:
Lean, six sigma, process efficiency
Quality:
Professional, technical standards
Value :
Integrated view; dynamic approach
Customer value: Perceived/ experienced value
CONCLUSIONS (II)
Healthcare providers tend to take value and quality as
self-evident. They do not specify what these are, neither
in an absolute sense, nor in a relative sense.
They do not see the risks involved.
RECOMMENDATIONS (1/3)
Introduce/revive customer value thinking at different
levels. Construct a value profile.
Accept that this will be awkward, time-consuming and
embarrassing.
Raise cost discussions to the level of value discussions.
Do not hide behind the excuse that healthcare value is
too complex to explain.
RECOMMENDATIONS (2/3)
Do not feel comfortable because your customers report
to be satisfied. As a feedback concept, satisfaction is
conservative/outdated.
If an insurer is only interested in costs, specify quality.
If you are an insurer, stimulate value thinking among
providers.
Refuse to discuss quality in the absence of costs and
vice versa.
RECOMMENDATIONS (3/3)
Compare your perception of the value profile with the
way your colleagues/customers view that profile.
Differentiate: customer value perceptions may differ over
customer segments.
In highly dynamic times, the value concept may prove to
be a welcome anchor in policy making.
Content + Politics = c
THANK YOU