An all-too-familiar institutional response, when facing the challenge of reducing health care costs, is to reduce health care benefits. But that approach entails limiting access to care, lowering health quality, and increasing out-of-pocket costs for patients — all of which run contrary to better health and better care at a lower cost.

A better way — and one that aligns with patient-centered care — is increasing value to the patient. We can do that by reducing waste and rewarding quality.

The Scope of the Waste Problem

Noriaki Kano, the renowned expert on quality management known for his leadership on customer satisfaction, identified six categories of waste in health care that are especially relevant: delay, rework (performing the same task a second time), overproduction, movement (unnecessary transportation of people, products or information), defects, and waste of spirit and skill.

All this waste has a price tag: According to a 2008 McKinsey report, U.S. health care overspending, when compared with more efficient and effective systems, totaled $643 billion in 2006. Of that, $436 billion was overspending on outpatient services, $98 billion was excessive use of drugs and "nondurables," and another $91 billion was overspending on health administration.

From a nurse's perspective, waste can be measured in time away from the bedside. From a physician's standpoint, waste can mean delay in starting procedures or operations. In the chief financial officer's view, waste can result in reduced margins, a need for cost-cutting and frustration that promised savings are not delivered.

But it's the patient's vantage point — frequently overlooked in health care — that is crucial for reducing costs. A patient experiences waste when care is not coordinated, and this results in unnecessary repetition of tests and exams, longer stays, avoidable complications, and higher health care costs. Improving the patient's experience is central to cutting waste and generating value in health care.

Rewarding Value

A recent report by the attorney general of Massachusetts, "Examination of Health Care Cost Trends and Cost Drivers," is one that leaders throughout the United States should consider carefully. It was issued in response to a state law authorizing the attorney general to "review and analyze the reasons why health care costs continue to increase faster than general inflation."

The report concludes: "To control cost growth, we must shift how we purchase health care to align payments with 'value,' measured by those factors the health care market should reward, such as better quality."

The key, of course, is transparency: focusing on quality so that poor, costly care is exposed; better care can be rewarded; and payers as well as consumers can make informed choices. Increased transparency will, in turn, require advances in how data are converted to usable information, including clinical, financial, service and satisfaction measures.

The goal should be clinical processes that result in the right level of care in the right place at the right time. The result of any market-based or regulatory approach should be to inspire those in health and health care to innovate and improve what they do first and foremost for the patients, the public and the communities they serve.

The critical factor in having patients take more responsibility for their health and health care is to develop relationships that are built on mutual trust and respect. This will require that our approaches — systems of care, if you will — are designed with the patient involved, not just with the patient in mind. Without this level of involvement, it is unlikely that patients will become more responsible; rather, they're likely to become more cynical that the care processes are designed for everyone but them.

Five Ideas for Better Value

At the Institute for Healthcare Improvement's National Forum in 2009, Don Berwick and Tom Nolan introduced the concept of "low-value health care" and the key drivers that contribute to it, including a "more is better" culture, supply-driven demand, no mechanism to control cost at the population level, over-reliance on doctors, and lack of appreciation for a system. Here are five ideas for countering this situation and creating greater value for the patient:

Changing behavior. A key ingredient is working with health care consumers broadly to promote healthier lifestyles and reduce incidence of disease. We must be more effective in promoting exercise and healthy eating and to provide education that will result in more preventive care. The greatest value to the consumer comes from not becoming ill in the first place. Health care improvement will struggle to keep pace with lifestyle choices that are generating chronic conditions and diseases at unprecedented rates.

Changing beliefs. We must overcome the common misconception that in health care "more is better." Too often we think that health care should have the cure when, in fact, the best results come from an ongoing relationship between a health care consumer and a provider who acts as a coach as well as a caregiver. That ongoing relationship should include a "medical home" with providers who have established trust with their patients, an effective combination of preventive care and care management, and a clear understanding of the patient's lifestyle, needs and goals. This also involves having the conversation about end-of-life care to assure that the wishes of the patient are understood not only by the provider, but also by the patient's family.

Creating a more discerning consumer. Americans have a well-deserved reputation as efficient comparison shoppers; we need to create conditions in which those skills can be applied to health care. A discerning consumer also can increase the "will" for improvement on the part of the provider; indeed, this is a familiar dynamic in virtually every other consumer sector except health care. While this is not the consumer's responsibility, it's an important byproduct that can greatly benefit the health care system as a whole.

Payment reform. Paying for value rather than volume should motivate providers to improve quality. The current business models must change so that providers become more rather than less viable as they become more efficient and effective.

Variation analysis. Comparative-effectiveness evaluations and leading practices can accelerate improvement. Increasing public awareness of variation and public understanding of the importance of leading practices are crucial, as they are essential ingredients in providing value to the patient as it applies both to the type and quality of care provided.

Better health, better care and lower costs (IHI's triple aim) are all achievable. Shifting attention to value for the patient is key. That's a big shift for health care providers, but it's in their interests. Paying for volume rather than value simply is not sustainable.

Jeffrey Selberg is the executive vice president and chief operating officer of the Institute for Healthcare Improvement, based in Cambridge, Mass. He is also the former charter president and CEO of Exempla Healthcare in Denver.