Here are four questions for you to reflect on:
 
1. What are the principal trends that are taking place, largely outwith the control of payers? I have listed some of the key characteristics of 20th century health services, not just the NHS, in the square peg on the left of the diagram below; what changes are need to fit a service into the round hole of the 21st Century?

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2. How many types of marginal analysis do healthcare decision makers carry out (consciously or unconsciously)?

3. What is the meaning of value in 21st Century healthcare? Set out below is an extract from the Better Value Healthcare Essential Glossary on Value, with the meaning of value deleted! Think now before checking below.

4. How does the transformation plan for your organisation reflect these changes in the environment?

ESSENTIAL GLOSSARY FOR UNDERSTANDING VALUE IN HEALTH & HEALTHCARE

Language creates reality, it does not describe it. That is one of the principles that has emerged from anthropology, linguistics and philosophy from authors as diverse as Ludwig Wittgenstein, John Searle and Benjamin Lee Whorf. Confusion about language and the meaning of the terms being used is one of the main causes of arguments, fruitless arguments, which disappear if everyone shares the same understanding of the term.

At BetterValueHealthcare we developed the 21st Century Healthcare Glossary with the principles of clarifying the meaning of commonly used terms to improve dialogue and decision making (a more detailed description of the rationale for the glossary can be found here). The glossary consists of 1000+ terms and their meanings in use. Some of these ostensive definitions are long and can be unwieldy for everyday use so we have, where appropriate, presented a shorter, more useful definition, which we call the bottom line for that term.

The table below presents the Essential Glossary in this topic area. You can see all of the words in the bulleted list below. For each term there is the Bottom Line (a short definition that everyone can and should be using), the Significance (a commentary written by Sir Muir Gray on how the term evolved and why it is important) and examples of the word In use which are direct extracts from the 21st Century Healthcare Glossary (a demo of which can be accessed at www.ocht-­‐glossary.net).

Decision – An action giving preference to one option over another.
Distributive Justice and Equity -­ Distributive justice concerns who ought to get what; equity is a subjective judgment of unfairness.
Efficiency -­ “… efficiency can be defined as maximising well-­‐being at the least cost to society.” Outcomes over inputs, whereas productivity is outputs over inputs.
Judgement -­ “Judgement (weighing the options) and decision making (choosing between the options).”
Marginal Analysis -­ Starting with a particular mix of services and analysing changes in that mix. If resources can be shifted to produce greater benefit then this should be done. Opportunity Cost -­ “The value of the next best alternative forgone as a result of the decision made.”
Optimality -­ Optimality is reached when resources or productivity create maximal benefit with the least harm.
Programme Budgeting – “If decisions are to be made about broadly defined health-­‐care objectives and priorities– then [financial] data should be provided in similarly broad terms to match the nature of the choices.”
Preference Sensitive -­ Interventions for which there is more than one option.
Quality – “The degree to which a service meets present standards of goodness.” Satisficing -­‐ A course of action that is satisfactory or “good enough”.
Sustainability – “Protecting resources from one generation to the next.”
Value – value is expressed as what we gain relative to what we give up – the benefit relative to the cost.”
Waste -­ “Waste, or muda, is any activity in a process that consumes resources without adding value for the customer.”

VALUE

Bottom Line
“…value is expressed as what we gain relative to what we give up – the benefit relative to the cost.”
Source: Institute of Medicine of the National Academies. (2008) Learning Healthcare System Concepts v. 2008. The Roundtable on Evidence-­‐Based Medicine, Institute of Medicine. Annual Report. (p.21.)

Significance
There are two different types of meaning. One may be called the principled meaning -­‐ such as “we value diversity”; the other is the economic meaning, the relationship between outcome and cost, in fund terms; in everyday language, an Oxford English Dictionary example “we cannot be seen to lack value for money.“

“One meaning of the word ‘value’ may be described as its moral meaning, namely ‘the status of a thing or the estimate in which it is held according to its real or supposed worth, usefulness, or importance’, the definition from the late Middle English. This use of the word ‘value’ is common in healthcare, for example the hospital which claims that ‘we value patient choice’, or ‘we value openness and honesty’.”

The second meaning in the Shorter English Dictionary can be described as the economic meaning. One of the four variants that the Shorter English Dictionary gives is ‘that amount of some commodity, medium of exchange, etc. which is considered to be an equivalent for something else’, and it gives as an example of the meaning of the term used in 1806, ‘we could hardly be said to have value for our money’.
Source: Gray, J.A.M. (2007) How to Get Better Value Healthcare. Offox Press. (p.6).

Examples of how the term is used; Extract from the Better Value Healthcare 21st Century Glossary

“The concepts of utility and value are commonly used in two distinct senses: (a) experience value, the degree of pleasure or pain, satisfaction or anguish in the actual experience of an outcome; and (b) decision value, the contribution of an anticipated outcome to the overall attractiveness or aversiveness of an option in a choice.”
Source: Kahneman, D. and Tversky, A. (Eds). (2000) Choices, Values and Frames. Cambridge University Press, Russell Sage Foundation (p.15).

The purpose of health care is to enhance physical and mental health status.

“Value in health care is expressed as the physical health and sense of wellbeing achieved relative to the cost. High value in health care therefore means getting the right care at the right time to the right patient for the right price.”
Source: Institute of Medicine of the National Academies. (2008) Learning Healthcare System Concepts v. 2008. The Roundtable on Evidence-­‐Based Medicine, Institute of Medicine. Annual Report. (p.21.)

“The concept of value combines quality and total cost: We have given a qualitative relationship here emphasizing the direct influence of quality and the inverse effect of total cost on value, but the precise relationship is usually more complex.”
Source: Langley, G.J., Moen, R.D., Nolan, K.M., Nolan, T.W., Norman, C.L., Provost, P. (2009) The Improvement Guide: A Practical Approach to Enhancing Organizational Performance. (2nd edition.) Jossey-­‐Bass (p.218).

“Value is not a bad word. When employers and insurance companies use the term, many providers suspect that it’s code for cost reduction. But Michael Porter, of Harvard Business School, and others have been pointing out for years that in healthcare, ‘value’ means something else: achieving good outcomes as efficiently as possible. It may never be expressible as a numerical ratio (quality divided by costs) that allows meaningful comparisons among providers. But measuring outcomes and costs does allow providers to push for improvement – and to learn from their competitors.“
Source: Meyer C, Kirby J. (2010) Leadership in the Age of Transparency. Harvard Business Review. (p.52).

“Value in any field must be defined around the customer, not the supplier. Value must also be measured by outputs, not inputs. Hence it is patient health results that matter, not the volume of services delivered. But results are achieved at some cost. Therefore, the proper objective is the value of health care delivery, or the patient health outcomes relative to the total cost (inputs) of attaining those outcomes. Efficiency, then, is subsumed in the concept of value. So are other objectives like safety, which is one aspect of outcomes.”
Source: Porter ME. (2008) What is Value in Health Care? Harvard Business School. Institute for Strategy and Competititveness. White Paper.
 

The views and opinions expressed in this article are those of the authors and do not necessarily reflect the views of The Economist Intelligence Unit Limited (EIU) or any other member of The Economist Group. The Economist Group (including the EIU) cannot accept any responsibility or liability for reliance by any person on this article or any of the information, opinions or conclusions set out in the article.