The CFA Perspective

A Simple Definition of “Value Equation”

Posted by Charles Franc

5/16/16 5:37 AM

A_Simple_Definition_of_Value_Equation_blog_image-690382-edited.jpgIt’s interesting how you sometimes casually read something and a statement pops off the page – a statement that clearly and succinctly describes a concept that is inherently complex or difficult to verbalize.  I was reading a Q&A session in the February 15, 2016 issue of Modern Healthcare with Marna Borgstrom, CEO of Yale-New Haven (CT) Health System (incidentally a past client of mine) discussing the challenge of being an academic medical center and the System’s approach to value-based care.  I would estimate that, up-to-now, there have been literally millions of words written about the so-called value equation – what it means, why it’s important, and how to go about achieving it.  I certainly know that it feels like I personally have read that many.  Admittedly, much of this discussion is confusing, contradictory, and laced with opinion, speculation and (understandably) author bias as well.

So when I read her statement, the little light bulb went off in my head.  Ms. Borgstrom stated:

“The numerator of value is making sure that we really get patient safety, the clear definition of clinical quality and the patient experience right.  The denominator is getting the cost/price point that people must pay for right.”

Admittedly, every word and phrase she used – patient safety, clear definition of clinical quality, patient experience, and cost/price – is subject to the same definitional, opinion and bias issues that are always present in such discussions, but I found the quote to not only be meaningful, but also succinct and even conceptually “elegant.”  It conjured up a picture in my mind of what “value” really is that I can understand and relate to, as well as use as my basis for discussing the concept with others.  Aren’t these attributes what define a good quote?  And further, isn’t it a good example of how a hospital system CEO should communicate a complex concept – simply, efficiently, elegantly, and most important, meaningfully?  I will concede that the real challenge is in the details, and the key is getting these complex concepts, as she correctly stated, “right.”  But that misses the point, which is the ability to communicate a complex concept in a simple, straightforward manner.

I certainly wish there were more good examples like this in the literature.  So often the inherent complexity of the healthcare system is compounded by inelegant and obfuscating language.

So, here’s a shout-out to Marna Borgstrom for furthering the discourse in an efficient and effective, even elegant, manner.  Thanks, Marna!

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