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Outlining the implications of this c-suite trend for pharma.
The recent appointment of a chief value officer (CVO) at multiple healthcare systems may represent a nascent trend among healthcare executive management teams—one that gives new prominence to the term “value” and could have implications for the pharma industry.
Across the country, the boards of many newly consolidated healthcare corporations are recognizing that the management of what is now a multibillion-dollar company can’t continue as it did when, just a few years ago, it was a multimillion-dollar enterprise. Legacy senior executives are being replaced with younger and more sophisticated CEOs who understand that the healthcare environment around them is changing and that they must adapt to those changes. Part of that means identifying what needs to be done and tasking people at the executive level to make it happen.
But the flurry of CVO appointments at the executive level is also a statement about the importance of value. It signals that the drive for value needs to come from the top, not delegated further down the organization.
A quick survey of CVO role descriptions at organizations like Nemours, Drexel University Health, and the University of Utah suggests some common themes. Responsibilities for CVOs often encompass both enterprise level and internal change. One branch involves building strategic partnerships at the enterprise level with payers, employers, and physician groups to take on innovative, value-based contracts. Internally, responsibilities are to drive change at the clinical practice level that leverages data-based research to improve outcomes for patients and to build capability to succeed in value-based payment contracts. Often, building population health principles into what the organization is doing is part of the mandate.
This recognition of the growing importance of value in the healthcare context and the elevation of responsibility for change appears to be a milestone. After years of talking about being accountable for cost and outcomes of care, this may signal that leading healthcare organizations are ready to take the concept seriously.
So, what does this mean for pharma? It may mean that delivery organizations are going to take on more financial risk in contracts with payers and employers—contracts in which they accept the need to make prudent, cost-effective choices in the treatment of patients, to keep them out of the hospital instead of relying just on the revenue they generate once they wind up there. That could mean that a change in prescribing policies and practices, substituting preventive measures for acute care, and increased use of lower-cost solutions before the latest discovery. That could mean that some pharma products see lower utilization unless ways are found to lower their effective cost.
That could involve more use of value-based arrangements by manufacturers—arrangements in which patient response to treatment, based on clear-cut metrics, determines discounts to unit costs. It could also mean lower utilization and slower growth in the uptake of some of the industry’s most expensive products.
This suggests that pharma companies need to take a value-based future more seriously, developing and testing approaches of their own that rationalize the cost of utilization and make the case for superior clinical outcomes that matter to patients. Otherwise, providers may increasingly make decisions that are based on the idea that “good-enough is good enough.”
Individuals and employers are staggering under the cost of insurance premiums that have been inflating regularly for years. It’s clear that the issue of healthcare cost is coming to a head soon, and perhaps some of the people leading healthcare corporations don’t want to be caught by surprise. Neither should pharma execs.
Michael Abrams is managing partner of Numerof & Associates, a global healthcare consultancy