Value-based Healthcare: Controlling Costs Through a Value Analysis Committee

From the Column Editor: The goal of the “Value-based Healthcare” column is to explore strategies that enhance the value of musculoskeletal care by improving health outcomes and reducing the overall cost of care. In this month’s guest column, we hear from David M. Kalainov MD, MBA, Clinical Professor of Orthopaedic Surgery at Northwestern University Feinberg School of Medicine, Medical Director of Orthopaedic Surgery at Northwestern Memorial Hospital, and current committee member and past co-chair of the Orthopaedic Surgery Value Analysis Committee at Northwestern Medicine, an 11-hospital healthcare system in the Chicago, IL, USA, metropolitan area. Dr. Kalainov discusses how value analysis committees (VACs), which have been growing in popularity with the shift from fee-for-service to value-based healthcare payment models, may help curb skyrocketing health care costs. Dr. Kalainov presents five principles for running an effective orthopaedic VAC.

— Kevin J. Bozic MD, MBA

Skyrocketing healthcare expenses in the United States are placing mounting pressures on healthcare organizations to cut expenses, including the rising costs of patient care, inflation, and stricter limits on government and private insurance reimbursements. In 2022, healthcare spending was USD 4.5 trillion, and that number is estimated to hit USD 7.2 trillion [2, 3] by 2031; these numbers are not sustainable.

One potential tool to achieve these reductions is a value analysis committee (VAC), which hospitals have used since the 20th century. The primary function of the VAC is to adopt and standardize products deemed important for patient care. These committees typically are divided into clinical specialties and include hospital-affiliated clinicians, supply chain personnel, and administrative staff. Data analysts, quality improvement specialists, and finance representatives may also be part of the group structure.

Over the past decade, the importance of VACs has grown in parallel with a shift from fee-for-serve to value-based payments for care, and VACs have provided orthopaedic surgeons with important roles in choosing and standardizing procedural solutions.

There are numerous opportunities for orthopaedic surgeons to improve value for patients while simultaneously tempering unnecessary spending. Although cost is important, patient value is prioritized in a properly organized VAC. As a current member and past co-chair of a multihospital orthopaedic surgery VAC, my recommendations for an effective orthopaedic surgery VAC include the following five principles.

Principle 1: Establish Thoughtful VAC Membership

Orthopaedic surgeons with several years practice experience who can engage with other members of the VAC and who are unencumbered by industry relationships are the ideal leaders of these committees. Physician leadership rather than leadership by administrators can prevent situations where a solution is produced by an administrator-led committee and subsequently rejected by clinicians; a contract can be expensive to break. Orthopaedic surgeons from all subspecialties should be invited into committee membership and with fair representation from all hospitals with orthopaedic services in a healthcare system. Physicians from other specialties who may frequently use orthopaedic devices should also be included (such as neurosurgeons who perform spine surgery). The committee should not be too large to encumber efficiency and effectiveness; in my opinion, a maximum of 20 voting members with additional nonvoting members as deemed necessary by co-chair insight is about right. Having a seat at the table is adequate incentive to maintain active clinician participation in the committee. Committee co-chairs and members who have relevant conflicts of interest pertaining to a product under discussion should inform the committee of this conflict and recuse themselves from voting on product adoption and product standardization.

Principle 2: Pursue Information on Product Safety and Outcomes

Many orthopaedic surgery products have limited patient outcome data, apart from safety reports and product recall information. In available studies that compare similar surgical solutions, there may be clinically unimportant differences in patient-reported outcomes. Third-party companies can assist in retrieving product-safety data, in addition to information on similar marketed devices. Surgical registries and evidence-based analyses may also provide useful insight. Electronic health record–integrated, patient-reported outcome measures hold promise; however, response rates may be disappointingly low. The recent ruling by the Centers for Medicare and Medicaid services for patient-reported outcomes in hip and knee arthroplasty may be useful in garnering patient-centric comparisons of hip and knee implant designs in the near future [1].

Principle 3: Compare Costs to Similar Solutions

Supply chain and finance specialists should provide summary information on pricing, cost comparisons, and general reimbursement for co-chair and general committee review. Transparency from the hospital and/or healthcare system is important to make sound and informed decisions. The physician proposing a new product should work with a supply chain representative to accurately identify similar adopted products and essentially equivalent products on the market for cost comparisons. At the direction of the committee, adopting a new solution may require replacing an existing and similar solution to improve negotiated pricing and supply chain efficiency. Committee members should pause and reflect on whether a proposed new product that addresses the same clinical need as an existing product will add cost without improving quality.

Principle 4: Establish Subcommittees to Standardize Solutions

Standardization of certain orthopaedic solutions can lead to better contracted pricing and improve product tracking and transfer within a multihospital system. If standardizing devices (such as hip and knee arthroplasty implants) or biologics (like bone graft substitutes), a co-chair can be assigned to assemble a group of surgeon stakeholders in the relevant subspecialty or subspecialties to represent their colleagues. The subcommittee should be given direction on the desired number of solutions and provide necessary resources to accomplish the task. A consensus from the subcommittee members can be sent to the full VAC for discussion and voting. Eventual product contracting and other procurement details will be under the purview of supply chain. Standardized product portfolios can be reviewed by the VAC at intervals for either continuation or change.

Principle 5: Avoid Succumbing to Groupthink

It is important that committee leadership find ways to manage powerful personalities in the VAC deliberations. Most surgeons have preferred implants, products, and approaches. Those preferences must take a back seat to the VAC’s primary goals: value (defined as quality divided by cost) and efficiency (not having an unnecessarily large number of similar devices or tools that seek to meet the same clinical need). If there is perceived but uncertain patient value, a trial of the product for a defined time can be considered. Groupthink and conformity because of the persuasive nature of a surgeon’s request can result in poor choices. Committee members may benefit from a periodic reminder to reflect on the value equation when reviewing and voting on product requests.

VAC Shortcomings and the Potential for Change

An orthopaedic VAC that is comprised in large part of voluntary surgeon members is unlikely able to police the overuse of devices and biologics that contribute to wasteful spending. There are other means to potentially oversee individual practice behaviors, including department reviews and peer-to-peer discussions. Alignment of incentives between hospitals and orthopaedic surgery departments to temper overutilization by shared savings may be an additional and mutually beneficial approach.

The current procedure focus of an orthopaedic VAC may conceivably be transformed over time into a committee focused on musculoskeletal conditions rather than procedures: a committee responsible for vetting solutions required for management of a patient’s entire care journey through an orthopaedic condition (for example, knee arthritis) [4]. In effect, a committee supporting an organizational transition toward value-based population health.