Moving Health Care From A Commodity To A Value-Based Industry

Health care
has become extremely politicized and will undoubtedly continue to be a source of ongoing debate.

Many are alarmed by how costly it has become. To optimally deal with this complex issue, consider the words of Albert Einstein: “We cannot solve our problems with the same thinking we used when we created them.”

Einstein is known for brilliant words and equations. In this spirit, I would recommend we stop thinking of skilled health care as a commodity and focus on it as a value-based system.

Commodities vs. Value

So what is the difference?

Dr. Jeff Hathaway, DPT explains a commodity is a product (i.e. a pencil) which has little if any qualitative difference across suppliers of the service.

For example, the pencil you buy at the Dollar Store is exactly the same as the one at Office Max; the value is static and the price is determined by market demand.

In terms of some health care, one could argue that the flu shot you get at Walmart is just as good as the one you get at the hospital and is cheaper; that does make sense!

In this scenario, looking at the flu shot as a commodity (same thing across the board) is fiscally sensible. Everyone loves a bargain!

Quality of Care

Unfortunately, many politicians (in particular) have come to view reimbursement of all health care this way. Unfortunately for this way of thinking, skilled health care is not a “thing” or a product which is uniformly the same everywhere you go. How many people want an ‘average’ physician to do their heart surgery?

It’s a good time to challenge how we view this component of the industry.

Quality of care must also be considered to in order to determine the true value of services rendered; an equation for this is:

“value= quality/ cost.”

The discrepancy in value is more evident when considering upstream and downstream total costs.

For example, a physician seeing someone for back pain typically prescribes medication, radiographs and/ or MRIs, and later refers them for physical therapy; the typical cost of all this could quickly reach $5,000-10,000.

Ironically, expensive diagnostics usually reveal little or no correlation to clinical presentation (Jensen, M.C, et al., New England Medical Journal 1994), and radiation is not good for you.

If the patient has a $10,000 deductible all that testing would be a complete out of pocket expense! Ultimately, the huge financial burden often adds more stress to the patient who may or may not get better.

Lower Cost, Better Value

In contrast, consider if the same patient went to a physical therapist for early intervention and was seen at a cash-based clinic requiring only four treatment sessions (with a bundled evaluation/ treatment cost of $100/hour).

Under most circumstances, the treatment is highly effective, the conditions are within the scope of PT practice, and the individual is pleased with the cost savings and outcomes.

The total cost for this path would be $400 and the compared cost savings would be $4600 or more (considering a patient-paid insurance annual deductible of $5,000 to $10,000, which is increasingly common under recent so-called “reforms” which ironically were widely touted by supporters as a magic wand for reducing the costs of medical care).

Because the cash-based provider is not preoccupied with jumping through endless insurance hoops, the individual receives more one-on-one time and attention, more care options, and more education and empowerment to self treat; the best care emphasizes helping others to help themselves!

Great research (by Fritz J Spine 2013) backs up just how much consumers can save with early physical therapy care.

Obviously, not all health care is the same and to achieve good value one must consider upstream and downstream costs, as well as the quality of care.

Cash-based (bundled) care can be a tremendous bargain option which is completely consumer-driven. I believe our ill health care system needs a heavy dose of this equation!


Dr. L. Voigt Smith, PT DPT CredMDT

About Dr. L. Voigt Smith, PT DPT CredMDT

Dr. Smith is a state licensed Doctor of Physical Therapy, owner of the Backsmith Advanced Physical Therapy clinic in Weston, Wisconsin, and inventor of the Backsmith Selective Stabilization Support. Dr. Smith prides himself on advanced and high value physical therapy care. He has been exceptionally effective with many outlier chronic pain patients. Dr. Smith is often able to save patients significant time and money, while restoring mobility and reducing chronic pain. Dr. Smith can be reached at the Backsmith Advanced Physical Therapy Clinic in Weston, WI (by appointment) or at (715) 298-5888.

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