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But imposing arbitrary spending limits on discrete components of care, or on specific line-item expense categories, achieves only marginal savings that often lead to higher total systems costs and poorer outcomes.For example, as payors introduce high copayments to limit the use of expensive drugs, costs may balloon elsewhere in the system should patients’ overall health deteriorate and they subsequently require more services.These cross-subsidies introduce major distortions in the supply and efficiency of care.

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Poor cost measurement has also led to huge cross-subsidies across services.

Providers are generously reimbursed for some services and incur losses on others.

For primary and preventive care, the unit of value measurement is a particular patient population—that is, a group with similar primary care needs, such as healthy children or the frail and elderly with multiple chronic conditions.

Let’s explore the first component of the health care value equation: health outcomes.

Outcomes for any medical condition or patient population should be measured along multiple dimensions, including survival, ability to function, duration of care, discomfort and complications, and the sustainability of recovery.

Better measurement of outcomes will, by itself, lead to significant improvements in the value of health care delivered, as providers’ incentives shift away from performing highly reimbursed services and toward improving the health status of patients.

It is not the number of different services provided or the volume of services delivered that matters but the value.

More care and more expensive care is not necessarily better care.

A medical condition is an interrelated set of patient circumstances that are best addressed in a coordinated way and should be broadly defined to include common complications and comorbidities.

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