This is the fourth article in a series about the components that influence the value of a novel healthcare solution and how to address them.

In the first article in this series I described the components that influence value (see the figure at the top of this article for an overview).

In the second article I talked about the first activity for addressing those value components: Mapping the Care Pathway:

In the third article I talked about the second activity: Exploring Relevant Perspectives.

The current article describes the third activity: sizing the opportunity and potential value capture. This activity is what is commonly thought of when it comes to assessing value, because here is where you are attempting to measure and quantify the value that may come from multiple sources: the costs of incorporating the novel solution into practice and the benefits that it produces. The goal is often to produce specific analyses that quantify things like cost-savings, ROI, or budget impact. And, truth be told, this is often where the bulk of the time and energy is spent (although effectively completing the first two activities described in the previous articles will greatly improve the efficiency and results of this step).

Sizing the Opportunity

A common mistake I see firms make is to try to estimate the potential value capture without first exploring the size of the opportunity; the opportunity is essentially the current gap in care, and it’s important to describe it before diving into the benefits associated with your solution. Sizing the opportunity quantifies things like the number of patients currently effected or the frequency and/or cost of care/complications/etc.

Keep in mind that the size of the opportunity is a function of multiple things, including condition prevalence, intensity and cost of care, frequency of care, and other things. For example: strokes are expensive to treat and debilitating to those who suffer from them, but for a given population they may affect only 4% of the population. Injurious falls are less expensive (in the short run) and less severe, but may affect 8 to 10 times as many individuals. Depending on the math, the less-costly event may actually present a greater opportunity to reduce costs or improve outcomes.

Sizing the opportunity can help frame the problem you are attempting to solve and places it into context. It essentially answers the question, “why should a provider/payer care?” and helps to confirm demand (which is essential for your solution to be adopted). And, while it can be difficult to create demand for a solution if none exists, sizing the opportunity helps to identify where demand exists (and where it doesn’t), and from whom. Since you’ve already mapped the care pathway and explored relevant perspectives, you know where demand for a solution must exist if there’s any hope for your novel device to be adopted and implemented.

Demonstrating the Potential Value Capture

The potential value capture is essentially how much your solution can “move the needle” within the opportunity you just quantified. If the opportunity reflects the current gap in care, the potential value capture is how much of that gap you think you can close.

Together, these two pieces paint a clear picture of the impact your device or med-tech solution can have. And, they work in tandem, because the size of the opportunity can vary.

Quantitative Methods

While conceptually it is helpful to consider the size of the opportunity and potential value capture, you will also need to actually quantify what those are. This can be challenging for organizations who are pre-market or early in their evolution.

I’ve written extensively on this elsewhere (here and here), but in general, you need to consider all the sources of costs and benefits, including those that are non-monetary, and you also need to determine which ones are “MMA”: Measurable, Monetizable, and Attributable to your solution. You might be able to use data from early clinical studies, evidence from previously published papers, or even expert opinion. To quantify the value in a credible and compelling way requires quite a bit of time and effort, but if done well it can paint a clear picture of the situation.

Let’s look at an example. Say you have a solution that aims to improve adherence to prescribed medications for community-dwelling older adults. To size the opportunity, you can find from published literature that, in general:

  • Within older adults, 40% to 60% are likely to have hypertension.
  • Further, hypertension will be uncontrolled in as many as half of these individuals.
  • For perhaps 80% of this group, the cause of uncontrolled hypertension is non-adherence to antihypertensive medications.
  • As a result, these individuals have increased risks of adverse events, like heart attacks and strokes, and are more likely to develop heart failure or other cardiovascular disease.

Using specific estimates regarding the risk of these events and their cost to treat, you might be able to calculate that for a hypothetical population of 1,000 patients, non-adherence is resulting in 20 to 30 additional strokes and heart attacks per year, costing an additional $1.2 to $1.5 million to treat per 1,000 patients (again, the numbers are not exact but are based on previously published research). This is the size of the opportunity. It clearly lays out the gap in care and its implications.

Now for your solution: if you claim that your device can improve adherence in, say, 60% of patients who were previously non-adherent, you can do the math to calculate the number of strokes and heart attacks potentially avoided and the associated cost savings: depending on the cost numbers you find, avoiding 15 strokes and/or heart attacks could save $300,000 to $400,000 per 1,000 patients, or $300 to $400 per patient. This is the potential value capture. You can see that your quantification is built upon multiple estimates, so that credibility (and an exploration of the sensitivity of your calculations, which will talk about in the next article) is critical. Showing your audience how you arrived at those values fosters understanding and, ultimately, credibility.

Again, these are broad strokes. But, when placed into the larger context of the previous activities you’ve performed (mapping the care pathway and exploring relevant perspectives), this provides a clear picture of the value for key stakeholders and allows you to develop a specific narrative targeted to your intended audience.

Next time, we’ll discuss the final activity: identifying barriers and sources of uncertainty.