Measuring value for money in healthcare: concepts and tools
Author(s)/Editor(s): Smith, PC
Publisher/Organizer: Centre for Health Economics, University of York
Publication date: Sept 2009
“The concept of value for money (VfM) has been central to health policy and the delivery of healthcare for some time. In its abstract form, the concept of VfM is straightforward: it represents the ratio of some measure of valued health system outputs to the associated expenditure, and few would argue that its pursuit is not a worthy goal.
The main reasons for an interest in VfM relate to accountability: to reassure payers, in particular taxpayers, that their money is being spent wisely, and to reassure patients that their claims on the health system are being treated fairly and consistently.
- In practice, the measurement of VfM is challenging and gives rise to some important methodological questions. The main aim is to offer an understanding of how resources are successfully transformed into valued health system outputs. But there are several stages to that transformation, each of which can be measured with different degrees of accuracy and ease. The result has been a profusion of partial indicators of VfM, but a relative dearth of definitive measures that capture the whole transformation process in the form of a cost-effectiveness measure.
- The two fundamental economic concepts underlying VfM are allocative efficiency and technical efficiency.
- In undertaking any VfM analysis, it is essential first to decide on the nature of the entity under scrutiny. At one extreme this might be the whole health system. At the other extreme, it might be the treatment of an individual patient.
- Another fundamental decision is whether to seek out a comprehensive measure of the costeffectiveness of the entire entity or to rely on partial indicators of some aspects of VfM. In the latter case, incompleteness can take two forms: omission of some aspects of the transformation from resources to valued outcomes (for example, no health outcome data), or omission of some of some of the functions of the entity (for example, analysis of only the inpatient activities of a hospital).
- There have been numerous efforts to implement VfM measurement schemes. These include whole-system productivity estimates, as attempted by the World Health Organization (WHO) in the World health report (WHR) 2000 and by the Office for National Statistics (ONS) in UK trends over time. These comprehensive, whole-system measures are experimental. More practical approaches have offered useful but incomplete indicators of VfM. All efforts have encountered severe methodological challenges and lack of data in key domains.”