Identifying the value associated with a particular invention, process, or device can be challenging. As a concept, value can be abstract and changes depending on the perspective and the situation. However, a well-defined value proposition can verify, or even increase the demand for a solution. In addition to improvements in quality and patient outcomes, establishing the value is an important component of making the case for your proposed solution.
There are many ways to try to encompass or quantify the value associated with improvements in care delivery. An intuitively appealing way to consider value is through a two-step process. The first step attempts to assess the size of the potential “opportunity,” the second explores the “magnitude” of the impact of the solution as a function of that opportunity. Situations with larger opportunities and where the solution addresses a larger portion of that opportunity are cases where the value will be larger.
To provide more detail, let’s look at each step in turn.
First, assuming an adequate need has been established, quantify the size of the opportunity that exists by exploring the specific characteristics of the situation. Larger opportunities are those where:
- The condition(s) involved is(are) more common or more prevalent (conditions like diabetes and hypertension as well as health encounters like clinic visits or routine check-ups, etc.)
- Current treatments require frequent and/or costly encounters (e.g., specialty care, etc.)
- Negative consequences/outcomes are common (e.g., ED visits) and/or costly (e.g., surgery, long-term rehabilitation, etc.)
- There is a high incidence of comorbid or subsequent conditions/events
- Care is known to have inefficient care delivery (e.g., poor communication, higher amounts of waste, etc.)
When compared with a smaller opportunity, a large opportunity will often impact more patients with conditions that require more costly treatments or disease burden.
Note that the size of the opportunity to capture value does NOT imply anything about the importance of the clinical issue. Improving care for a rare disease is just as important as improving care for a common one, but there may be less opportunity to capture significant value within a rare disease.
It’s also important to note that different combinations of prevalence, cost and event rates can impact the size of the opportunity.
For example, treating an acute myocardial infarction is expensive, maybe $20,000 per event and up, but maybe only 4% of a target population will experience them. Falls are much less expensive to treat on average, but are much more common. As many as one-half to two-thirds of older adults fall per year. Consider an older population of 1,000 individuals where the incidence rate of AMI is 4 per 1000 patient years. The expected cost to treat MI in this population is $800,000, or $800 per 1000 individuals. Compare that with the cost of falls in that same group. While the cost of an average fall may be much less, say $3,500 per fall (with significant variation depending on fall severity and subsequent injuries), as many as 50% of the group may be at risk of experiencing a fall in a given year. With those parameters, the expected costs associated with falls is $1.75M, or $1,750 per 1000 individuals. In this example, the less expensive event reflects a much larger opportunity to capture value.
Second, once the opportunity has been identified, demonstrate how much of that opportunity your proposed solution will address. Solutions with a higher impact will be those that:
- Are applicable to most or all patients identified in the opportunity
- Produce a large reduction in risk, adverse events, errors or care frequency/intensity
- Significantly improve overall health and/or reduce comorbidity
- Reduce waste or improve efficiency
Within the opportunity of falls, a solution for fall reduction that targets all hospitalized patients will potentially have a larger impact than one that targets only the subset who have conditions impacting balance or gait. If trying to reduce costs associated with inpatient stays, a treatment that avoids the need for an inpatient stay altogether may capture more value than one that simply shortens the length of a stay. These examples demonstrate situations where the size of the circle may be the same or similar, but the amount of that circle (the opportunity) impacted by the solution differs.
Together, those two steps can produce a compelling story for why the value of the solution is high.
To increase the value, you either need to increase the opportunity or increase the impact (or both):
However, there may be times when a smaller opportunity actually has a larger potential value. There are certain scenarios where a large opportunity only presents a small impact window. You may be able to capture more value with a solution that has a larger impact within a small opportunity (essentially, “covering” more of a small circle can gain you more than covering only a small slice of a large circle).
As you think about how to capture value in your own endeavors, consider the size of the opportunity, the size of the impact, and how they interact to produce the total potential value.
Most of this is abstract because it is not only about the actual size of the opportunity and impact, but also about what you can measure and quantify. You will also likely be interested in whether the impact is in the short-term or long-term (or both) and how much of the opportunity is directly relevant for the intended audience (payers might realize more or less of the value than a provider or patient would, for example).
Examining the potential value capture by considering the size of the opportunity and impact does not eliminate the need to think about the more nuanced components of value assessments. But, it can be an intuitive way to begin to approach the value assessment phase and may help you think more critically about projects you seek to undertake in the future.
If you liked this article, consider subscribing to monthly thought leadership here.