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Value-Based Innovation in Health Care

Value-based health care is a hot topic in the US health system. Determining value is not easy, but whatever the definition, it implies balancing quality and cost. What is the role of innovation within this new paradigm?

This blog explores the concept of value-based innovation in the medical domain. This domain is chosen as an example as the issue is pressing—there are too few research ideas that make it to medical practice, and the development of new drugs and devices is too expensive and time-consuming, making health care unaffordable in the future.

The Need for value-based health care

Value-based health care promises to bring down costs while improving the quality of the system as a whole. This concept is typically applied on the “care” side of the healthcare system, but can the value of the innovation side be improved as well?

The need is certainly there. There aren’t enough ideas in the pipeline to sustain the pharmaceutical industry, and developing new drugs takes an average of 17 years and $1 billion—costs that healthcare consumers end up paying. In the meantime, the NIH budget is under financial pressure, with less money available for a growing constituency of healthcare researchers.

What can be done to improve the performance of the innovation system so that it generates more ideas, which can then be developed faster and at a lower cost? In other words, how can the healthcare innovation system provide more value?


Applying value-based thinking

Value-based methodology looks at where in the process opportunities are lost or money is wasted. To define where waste exists in the process, you need to start by defining its objective: better care at lower cost from the perspective of the patient.

This definition brings us to the next issue: value-based thinking relies on data related to the quality and cost of care.

The need for data

Which treatment is most valuable for a particular patient? That question is the basis of evidence-based medicine. However, evidence-based medicine is mostly concerned with healthcare outcomes, whereas value-based medicine includes cost in the equation.

Traditionally, costs have been taken out of the equation, because it was believed that patients have the right to receive the best possible care regardless of cost. However, with ever-escalating costs and unaffordable healthcare bills for many patients, including the price of treatment options may be a worthwhile consideration when developing and bringing new ones into practice. When results are similar but the costs of treatment differ, then it is important to know which option is cheaper.

Yet the data needed to assess the costs of various treatments are often absent. Even if available, the information can be scattered in different places and hard to retrieve for a coherent picture. The medical record contains information on the actual care received, yet this often does not include care obtained from providers outside that particular system. Nor does the electronic medical record include information on real costs, let alone what the patient or insurance company paid for the services. Currently, only integrated hospital systems like the Mayo Clinic are equipped to assess the value an innovation brings compared to existing treatment options.

Value-based innovation

Value-Based innovation implies taking into account the cost of the innovation during development. In industry this is common practice, however in academia, where a lot of the clinical and translational science efforts take place, the cost of treatments is typically not considered.

Making a start?

Creating a value-based innovation system will not happen overnight, but it does not necessarily need to take decades either. Here are some crucial factors needed for it to succeed:

  • The acceptance of evidence-based medicine
  • The availability of cost data for all aspects of health care
  • The cost of treatment as an integral part of translational and clinical research

Value-based innovation has a lot of potential, as without it, better care at lower costs from the perspective of the patient will be very difficult to achieve.

Interested in using a value-based innovation perspective? Please contact us at: info “at” organizing4innovtion “dot” com, or visit our website



Interesting reads and references

Aragon, R. 2011. Thinking Outside the Box: Fostering Innovation and Non–Hypothesis-Driven Research at NIH. Science Translational Medicine, 3(70): 70cm75.

Collins, F., S. 2011. Reengineering Translational Science: The Time Is Right., 3(90): 6.

Porter, M. E. 2009. A Strategy for Health Care Reform – Toward a Value-Based System. The New England Journal of Medicine, 361(2): 109-111.

Porter, M. E. 2010. What is Value in Health Care. The New England Journal of Medicine, 363(26): 2477-2481.

Porter, M. E. 2011. How to Solve The Cost Crises in Health Care. Harvard Business Review(September): 47-64.

Trochim, W., Kane, C., Graham, M., & Pincus, H. 2011. Evaluating Translational Research: A Process Marker Model. Clinical and Translational Science, 4: 153 162.

Implementation Research: A Synthesis  of the Literature 2005 Dean Fixsen, Sandra Naoom, Karen Blasé, Robert Friedman, Frances Wallace