Expanding the Value Conversation
Understanding value is essential to making wise healthcare decisions. With rising healthcare costs, purchasers want to know how they will benefit from the care they are getting. Today’s consumers demand efficiency from everything they purchase and will expect no less from healthcare. The COVID-19 pandemic has stress-tested healthcare systems around the world, called out their weaknesses, and taught us that we need to make better choices. This requires a thorough evaluation of the options, and with its focus on measuring value to improve healthcare decisions, ISPOR is well-positioned to support the necessary changes. In this article, we kick off a series on the definition of healthcare “value” from different stakeholder perspectives. Specifically here, we provide an introductory primer on value with input from interviews with selected experts.
The pandemic offered us a unique opportunity to reimagine healthcare. To make it better, we must first determine what needs to be improved. Value will be an important measure of our success, but it is a complex multidimensional metric. The weights given to different aspects of value vary among individuals and across stakeholder types. Economists think in terms of value for money. “Of course, it depends on perspective and whose value you’re talking about,” says Peter J. Neumann, ScD, Tufts Medical Center (Boston, MA, USA) and Chair of ISPOR’s Special Task Force on Value Frameworks. “What they’re willing to pay defines value. From society’s perspective there is, of course, the idea of opportunity cost—what are we willing to give up to receive the new service or technology?” However, willingness to pay is difficult to measure in a healthcare system where the ultimate consumers neither pay the price, nor experience the trade-offs.
Merriam-Webster’s Dictionary offers a general definition of willingness to pay as “relative worth, utility, or importance.”1 Advertisers often use these terms: the value meal; buy one, get one free; bulk package pricing; and discounted “sale” prices for a limited period. Should we buy more to get the lower unit price? Will we use it all? Should we buy now when we don’t need it yet? Will our use justify the price?
At Premera Blue Cross, we explored perceptions of value with focus groups of plan members. Some members associated value with poor quality, a “bargain” whose low price reflects a minimal worth. Value Village, a chain of second-hand thrift stores, was cited as an example. “Cheap” is not the image we want to see attached to healthcare, but when we explained the idea of value for money, none of the interviewees could offer a synonym that adequately captured the concept.
This article provides an overview of the value concept and traditional research methods from the perspective of health economics researchers and health technology assessors. These methods fail to capture the full range of elements that contribute to value. As Neumann notes, “If we know we have an intervention that works, there are broad consequences that we don’t usually capture—consequences to the family, society, future investment, science—things like that. Some studies do, but usually the data are not very good and there’s a lot of uncertainty around it.” Subsequent articles in this series will explore these and other elements of value from the perspectives of stakeholders.
"If we know we have an intervention that works, there are broad consequences that we don’t usually capture—consequences to the family, society, future investment, science." — Peter J. Neumann, ScD
Determining Net Cost
Health economists and policy experts often equate “cost” and “cost-effectiveness”. Comparative value is then measured as the incremental cost-effectiveness ratio, which is the incremental net cost (factoring in cost offsets) divided by the improvement in net clinical benefit. The incremental cost-effectiveness ratio measures how much a medical intervention (eg, drug, device, program, surgery) improves health outcomes compared to another intervention or no intervention and whether this justifies the additional dollars spent.
Direct healthcare costs can be predicted with economic models and confirmed by retrospective analysis of large databases, from a payer perspective. Indirect costs are less accessible, but reasonable estimates can usually be made. The societal perspective is commonly used where government is the payer. In the United States, where employers fund a large portion of health insurance, employer perspective modeling is also useful, particularly when evidence suggests an impact on absenteeism, productivity, or longevity in the workforce. Future stakeholder interviews should identify other elements of value. Notwithstanding these different perspectives, incremental net cost can usually be estimated with stakeholder input.
Estimating Benefit: Clinical Perspective
Capturing the net benefit is more challenging. At the core of this, regardless of perspective, is an estimate of the direct clinical benefit to the patient. This includes both positive (eg, improvements in health) and negative (eg, adverse effects or other harms that may result from treatment). Diana I. Brixner, RPh, PhD, Executive Director of the University of Utah’s Pharmacotherapy Outcomes Research Center (Salt Lake City, UT, USA) and an expert in large database research, reminds us that to make informed decisions, clinicians need the right comparison. “When a new drug comes to market, the question is always, What incremental benefit does this treatment provide to the standard of care (ie, what I’m paying for today to treat that same disease and that same indication)? And that incremental benefit includes trade-offs. What’s the efficacy, safety, route, and frequency of administration? Those are all components of benefit and any one of them may balance another off in the collective average, and—this is the tricky part—an improvement in the patient’s quality of life.
The clear method is to execute a real-world study, collect data from numerous places that are using this product to show that in the real world that is, in fact, true. That’s the evidence that managed care wants,” said Brixner. Funding will be required to do these studies, and organizations like ISPOR can play a role in that.
Clinical nuance is important, as the University of Michigan’s Institute for Healthcare Policy and Innovation’s website suggests:
Achieving value in healthcare…means ensuring that people receive the medical tests, procedures, and treatments that they need to improve their health—but not services that are unnecessary, nor those whose potential harms or costs outweigh the likely benefits.2
The concept of clinical nuance…recognizes 2 important facts about the provision of medical care:
(1) medical services differ in the amount of health produced, and
(2) the clinical benefit derived from a medical service depends on who is using it, who is delivering the service, and where it is being delivered.3
Relevant clinical outcomes include longer life, fewer undesirable medical events (heart attack, stroke, fractures, etc), pain relief, and improved function. Organizations including the Institute for Clinical and Economic Review,4 Memorial Sloan Kettering Cancer Center,5 the National Comprehensive Cancer Network,6 and the American Society of Clinical Oncology7 have developed value frameworks that extend the assessment of benefit to additional domains. These will be addressed later.
Whenever patients interact with the healthcare system, there is risk of unintended harm. Usually the risk is small, compared to the expected benefit, but it must be counted. Along with the more likely possibility of wasted expense when the intervention fails to deliver benefit, this is a good reason to avoid unnecessary care.
The QALY as a Measure of Net Benefit
Despite its widespread use, the quality-adjusted life year (QALY) is acknowledged to be inadequate by most users and vociferously criticized by opponents. The conceptual simplicity of the QALY is both its strength and weakness. QALYs are added by extending an individual’s life expectancy, improving the utility assigned to their remaining years, or both. When utility is plotted versus time, the area under the curve with treatment minus the area without treatment represents the net QALY gain. “The cost-per-QALY framework is valuable because it gives us a way to think about this with a common benchmark,” says Neumann. “Otherwise, we don’t have any standards.”
"Payers and those that generate evidence are starting to come together to address what evidence is needed to demonstrate value and then associate reimbursement and coverage to that value." — Diana I. Brixner, RPh, PhD
QALYs are unpopular with the public. Politicians argue that a metric based on life expectancy is weighted against the elderly. Quality adjustment using population-based arbitrary rules to determine utility denies patients self-determination. Desire to continue living is increased by relationships and life milestones but decreased by chronic, poorly controlled pain. In some cases, societal benefit guides resource allocation, as when the Centers for Disease Control and Prevention prioritized vaccinating seniors against COVID-19 to avoid overwhelming hospital intensive care units with patients more likely to have severe disease and causing harm to non-COVID patients.
Patients with disabilities caused by rare diseases are assigned lower utilities. Advocates argue that discounting their lives is discriminatory. Transformative treatments that would allow them to achieve greater independence would likely benefit society as well as improve quality of life. Allowing “experts” to determine the value of a life is ethically and practically problematic. Prioritizing expensive interventions based on quality-adjusted survival might have denied us the brilliant scientific contributions of Stephen Hawking and the work that many other “differently abled” individuals have contributed to make the world a better place.Applying population-based utilities to individuals overlooks subjective quality of life. People respond to illness differently, depending on personality, circumstances, and life history. Sudden blindness in an adult may cause extreme anguish and inability to navigate daily life, while an adult born blind has adapted and functions well in most of the same situations.
Utility of a given health state would vary among individuals experiencing it and may vary over the lifetime of one individual. Patients with spinal cord injuries typically experience suicidal depression after their injury but can’t act on their desire to end life. After adjustment, many of them find fulfillment and some even report a more focused and purposeful life. From this perspective it would be best for the individual patient to assess his/her own utility (experience-based utility value), rather than using population-based preferences,8-10 but the patient’s desire for access to treatment makes it hard for them to be objective.
Recently, ICER has begun reporting equal-value life years gained (evLYG) along with QALYs. Neumann agrees that, “It responds to some of the criticisms that QALYs could discriminate against people that have low baseline health. You can’t return them to a higher utility, so it will give you the same utility value as people who are not disabled for the extended length of life.” However, he acknowledges, “It doesn’t solve the problem altogether because it still has consequences. You don’t value certain drugs as much as you would otherwise, given their benefits.” Although the evLYG measure does not “discriminate” against cancer patients by designating a year of life with their condition as “worth less” than a year of life for an individual in typical health, it can fail to recognize the full value of medications that improve symptoms for these patients “But do them both,” Neumann concludes. “The QALY is one way of doing it. It’s not the only way.”
Exploring Additional Dimensions of Value in Real-World Evidence
Brixner suggests real-world evidence (RWE) can inform workplace-based metrics important to employers. “One of the big ones is worker productivity. At the end of the day when you look at who is paying the bills, it’s the employer. People talk about productivity, absenteeism—all those aspects that need to be quantified for the employer.” For the data to be useful, they must come from a credible source. “RWE is the bridge of information between what we have today and what payers are asking for, both public and private.” Confirmatory studies, she believes, can address the questions left unanswered by the US Food and Drug Administration’s accelerated approval process, and there should be a registry for them as there is for clinical trials. “Payers and those that generate evidence are starting to come together to address what evidence is needed to demonstrate value and then associate reimbursement and coverage to that value.”
ICER’s value framework is a more holistic approach that adds contextual factors and other considerations that impact value in specific cases. These include ethical considerations, unmet medical need, rare disease status, public health impact, and likelihood of affecting adherence (positively or negatively).4 ICER President Steven D. Pearson, MD, MSc (Boston, MA, USA) explains the organization’s founding vision. “Because I was trained as a doctor, I wanted to improve health. You can improve the health of individual patients and communities, but healthcare is only a part of improving health, and health is only a part of our overall well-being. Value in a healthcare system is how much you can improve that health, realizing that whatever measure we are using, health is not the only object of our health system.”
Value assessment is a critical component of the process of improving our healthcare system, particularly when resources are more tightly constrained. “Value is how we use our limited resources to achieve that goal, to improve the health of individual patients and of communities,” says Pearson. “It implies that we have to make choices. Value to me is only useful as an idea that forces us to take on the idea of making choices.” The pluralistic nature of our healthcare system and decentralized decision making also obscure the choices currently being made. “Our best intention is to do more. Value is a way of thinking through the choices we have to make. When people pretend that there aren’t hard choices to be made, that’s when bad choices are made.”
The Importance of the Patient’s Voice
Listening to patients is critical to ICER’s review process. “It’s reinforced the idea that even we ‘smart’ doctors don’t know what we don’t know. We end up making short cuts in the way we think about conditions and people and averages in a complicated world. The more you listen to patients, the more you hear nuance, diversity of experience we never would have guessed—not just diversity in race or income, but the human experience.” Patient groups, he says, tend to be more concerned about access. “We need to get a lot better at asking questions, the answers to which would improve our assessments.”
"The more you listen to patients, the more you hear nuance, diversity of experience we never would have guessed—not just diversity in race or income, but the human experience." — Steven D. Pearson, MD, MSc
When ICER and other organizations produced value frameworks, ISPOR convened a Special Task Force to provide guidance for future framework development. The ISPOR initiative produced 7 guidance documents published in 2018.11-17 One of these identified a longer list of 12 dimensions of value, some of them not included in existing frameworks. Not all of these dimensions are easily quantified, but with stakeholder input they might be included in a multicriteria decision analysis framework. Only 4 of these dimensions (ie, QALYs, net costs, productivity, and adherence-improving factors) had been included in one or more previous frameworks. The other 8 proposed by ISPOR are reduction in uncertainty, risk or fear of contagion, insurance value, severity of disease, value of hope, real option value, equity, and scientific spillovers.13 Depending on one’s perspective, some or all of these may be considered in developing an operational methodology for assessing value in a specific setting.
Neumann emphasizes the importance of “better incorporating attitudes toward risk and value to nonpatients when you have a new treatment. If there’s a new treatment for Alzheimer’s, we’re all feeling better about our future—even if we never get Alzheimer’s. It’s real. You should measure it and understand it. If we’re really trying to measure value, we should do it comprehensively.”
Next: The Provider Perspective
The concept of value is complex, multidimensional, and varies according to the perspectives of the various stakeholders in our healthcare system. Subsequent articles in this series will include interviews with various stakeholders to explore their understanding of value. As we emerge from the COVID-19 pandemic, we have a unique opportunity to pause, reflect, and create a vision for the future that improves the value delivered and meets the future needs of an expanding society. The next article will present the perspectives of providers and health systems. Later articles will cover the perspectives of payers, plan sponsors (employers), patients, and caregivers.
1. Merriam-Webster Online Dictionary. https://www.merriam-webster.com/dictionary/value. Accessed March 26, 2021.
2. Michigan Institute for Health Policy and Innovation. https://ihpi.umich.edu/. Accessed January 10, 2021.
3. Fendrick M. Understanding Clinical Nuance. https://www.ajmc.com/view/understanding-clinical-nuance. Accessed February 7, 2021.
4. Institute for Clinical and Economic Research. Methods Update: Value Assessment Framework: ICER’s 2020-2023 Update. Published January 31, 2020. https://icer.org/assessment/value-assessment-framework-2020/. Accessed February 20, 2021.
5. Memorial Sloan Kettering. Drug Abacus tool. http://abacus.realendpoints.com/abacus-mskcc?ab-eff=1000&ab-tox=0.1&ab-nov=1&ab-rare=1&ab-pop=1&ab-dev=1&ab-prog=1.0&ab-need=1&ab-time=1607377695. Accessed March 31, 2021.
6. NCCN Clinical Practice Guidelines in Oncology (NCCN Guidelines) With NCCN Evidence Blocks™. https://www.nccn.org/evidenceblocks/default.aspx. Accessed March 31, 2021.
7. Schnipper LE, Davidson NE, Wollins DS, et al. Updating the American Society of Clinical Oncology Value Framework: revisions and reflections in response to comments received. J Clin Oncol. 2106;34(24):2925-2934.
8. Brazier J, Rowen D, Karimi M, Peasgood T, Tsuchiya A, Ratcliffe J. Experience-based utility and own health state valuation for a health state classification system: why and how to do it. Eur J Health Econ. 2018;19(6):881-891. doi: 10.1007/s10198-017-0931-5.
9. Kahneman D. Evaluation by moments: past and future. In: Choices, Values and Frames. Cambridge University Press and the Russell Sage Foundation, New York, NY; 2000:693-708.
10. Kahneman D, Krueger A, Schkade D, Schwarz N, Stone AA. A survey method for characterizing daily life experience: the day reconstruction method. Science. 2004;306(5702):1776-1780. doi: 10.1126/science.1103572. PMID: 15576620.
11. Neumann PJ, Willke RJ, Garrison LP. A health economics approach to US value assessment frameworks—introduction: an ISPOR Special Task Force report . Value Health. 2018;21:119-123.
12. Garrison LP, Pauly MV, Willke RJ, Neumann PJ. An overview of value, perspective, and decision context—a health economics approach: an ISPOR Special Task Force report . Value Health. 2018;21:124-130.
13. Lakdawalla DN, Doshi JA, Garrison LP, Phelps CE, Basu A, Danzon PM. Defining elements of value in healthcare—a health economics approach: an ISPOR Special Task Force report . Value Health. 2018;21:131-139.
14. Danzon PM, Drummond MF, Towse A, Pauly MV. Objectives, budgets, thresholds, and opportunity costs—a health economics approach: an ISPOR Special Task Force report . Value Health. 2018;21:140-145.
15. Phelps CE, Lakdawalla DN, Basu A, Drummond MF, Towse A, Danzon PM. Approaches to aggregation and decision making—a health economics approach: an ISPOR Special Task Force report . Value Health. 2018;21:146-154.
16. Willke RJ, Neumann PJ, Garrison LP, Ramsey SD. Review of recent US value frameworks—a health economics approach: an ISPOR Special Task Force report . Value Health. 2018;21:155-160.
17. Garrison LP, Neumann PJ, Willke RJ, et al. A health economics approach to US value assessment frameworks—summary and recommendations of the ISPOR Special Task Force report . Value Health 2018;21:161-165.