COV_Value_sb_Cimasi.jpgRegardless of the specific approach a health system or hospital takes to improve value, a fundamental question remains: What exactly is value in health care?

From a strictly financial perspective, the elements of valuing health care services and assets are well-established, says Robert Cimasi, president of Health Capital Consultants, a St. Louis-based firm specializing in health care asset valuation. Worth is based on expected future income with consideration for changing regulation, technology and governance.

However, the true source of value lies elsewhere, Cimasi says. “It goes back to John Dewey. Value is in the eye of the beholder.”

For the American philosopher and pragmatist Dewey, value is not intrinsic to objects but derives from their utility in fulfilling human desires and needs. So, the value of health care ultimately comes from “positive externalities that have little to do with the strict financial or economic value of services or assets to an enterprise; that is, the value to society of the public benefit deriving from health care services,” Cimasi says. These include good health and freedom from disability and everything flowing from them, including prosperity and human happiness.

Recognition of this by the public and payers is disrupting health system strategies and operations — and asset values, Cimasi says. “All of a sudden, everything we used for years to value physician practices, hospitals, outpatient facilities and nursing homes — work [relative value units], compensation, ancillary revenues — now must be considered in relation to these positive externalities. We see some kind of desirable outcome and divide it by the dollars spent, and that gives you value.”

The fact that value is even an issue is a byproduct of medical progress, says Thomas H. Lee, M.D., chief medical officer at patient-experience research and consulting firm Press Ganey. “Health care has operated on the assumption that whatever we do is good. Under that assumption, revenue reflects the good we are doing, and maximizing revenue means maximizing good works.”

But today, medical technology allows physicians to do much more — sometimes more than is effective or desirable, says Lee, who also practices primary care part time at Brigham and Women’s Hospital in Boston, is a professor at Harvard’s schools of medicine and public health and is chairman of the board at Geisinger Health System, based in Danville, Pa. Change is clearly needed, he asserts. But what kind of change?

“I think the only answer that works for all stakeholders is meeting the needs of patients and doing it as efficiently as possible,” Lee says. Health systems that embrace this goal and fully commit to achieving it will not only improve care, they will also emerge as winners in an increasingly value-driven health care market.