Value for Money is an important concept that is receiving increased attention in the healthcare sector – the sense of urgency around demonstrating value for money continues to accelerate for Canadian healthcare organizations.
This heightened focus has triggered a closer look at what we really mean when we talk about ensuring value for money (VfM). While some limit their perspective on VfM to the financial elements of a transaction or investment (including an evaluation of the associated elements of economy, efficiency, and effectiveness), others have advocated for a broader perspective that includes integrating other important elements (such as strategic fit, potential health outcomes, and implementation risks) into the framework for thinking about value for money. To learn more about VfM concepts, please click HERE to read a previous blog post on this topic.
While the increased emphasis on achieving value for money has stimulated deep thinking and discussion among healthcare leaders, it has become critical for healthcare organizations to demonstrate that they are achieving optimal value for money. Of course, the usual way of doing this is through evaluation and assessment – particularly because governments and funders are looking for evidence that value for money is being achieved by the healthcare organizations they support.
So, how can your organization measure and demonstrate that it is achieving value for money? Let’s take a closer look.
Deciding What to Measure
It turns out that there are a range of measures and tools that organizations can use to assess the cost savings and economic effects component of a broader value for money framework. However, the tools used will depend on the situation, the perspective of stakeholders, and the question organizations wish to ask/answer through their assessment of VfM.
With this in mind then, your starting point for measuring VfM is to answer a few important questions – this will help you determine what process, measurement methodology, and measures you should contemplate using. Here are the key starting questions suggested in the article “Evaluation Methods for Assessing Value for Money”:
1 How are we defining value in this situation? From who’s perspective? Who is going to decide on what value looks like/includes? (remember that the assignment of value is a very subjective thing and that the perception of value can vary from stakeholder to stakeholder, across time and location, and from situation to situation. Before you can think about measuring value for money you must be clear about what constitutes “value”)
2 What is the purpose of measurement? (more on this shortly)
3 Are we evaluating the value of one project/option/solution/opportunity or are we comparing several to each other?
4 Is value being evaluated in monetary terms only or will we use a broader definition that may or may not include a proxy measure of value?
5 Will our evaluation process make sure that we have agreement on the costs and benefits used for our calculations? How will we do that and how will we ensure that the calculations are transparent?
6 Will our assessment process be used to engage and promote participation by stakeholders? Will we use measurement and results to promote and demonstrate our accountability to stakeholders?
With the answers to these questions in hand, you will be in a position to select the most appropriate evaluation methodology for the cost evaluation portion of your value for money assessment/measurement.
Here are some examples:
|Purpose of Measurement||Suggested Methodology|
|Compare alternatives that aim to achieve the same goal/outcomes||Cost Effectiveness Analysis|
Compare alternatives that aim to achieve different goals/outcomes
Cost Benefit Analysis
Want to determine whether benefits outweigh the costs
Cost Benefit Analysis
Want to consider individual stakeholder preferences
Want to consider social costs
Compare the impact and performance of each program/solution relative to other programs/solutions
Basic Efficiency Resource Analysis and Rank Correlation
To see a description of each measurement methodology, and the advantages and disadvantages of each one, please read the article “Evaluation Methods for Assessing Value for Money”.
Once you have finalized your measurement methodology, you are ready to move forward.
Deciding When to Measure
The key question here is should you, as a matter of your usual practice, measure VfM pre-or post decision and implementation of the program/option?
Some healthcare leaders advocate using value for money measurement as part of the decision-making process which includes building the completion of a VfM framework right into the decision-making process. This makes a lot of sense as it can pro-actively ensure that your organization’s business decisions are driving optimum value.
Others opt to assess whether optimal value for money was achieved after the fact – this is the thinking behind value for money audits that are done by an organization itself and/or by the funder. While auditing limits your ability to correct past decisions, it does enable learnings that can be applied to future decisions with VfM implications.
I would recommend a dual approach that builds a VfM evaluation into the business case/decision-making process and then validates whether the projected value was achieved post implementation. Doing this helps healthcare organizations make better decisions, based on validated VfM criteria, up front. And the learnings from the VfM audit process can be used to improve the VfM evaluation process (including the criteria used and the organizational skill level related to VfM assessment). The outcome of the dual approach should be improved organizational ability to make better, more efficient business decisions with the confidence that implementation will deliver the expected optimal value for the money.
Building Your Organization’s Capability to Measure VfM
Any healthcare organization that wishes to make value for money measurement part of its regular approach to business decision-making and management absolutely MUST implement three essential elements – without organizational capability regarding value for money assessment, efforts to measure and leverage value for money performance results will be sub-optimal.
1 A consistent framework and set of criteria
You need to establish a commonly understood framework to assessing value for money that is highly flexible and sensitive enough to accommodate appropriately and responsively to the varying nature of the definition of value.
2 Organizational skills and capacity
The people who are participating in value for money evaluation processes need specialized skills including financial analysis capabilities, an understanding of your business environment and business strategy, and strategic thinking. You must be prepared to invest in building these important skill sets and you must ensure that people have the time to focus on VfM assessment activities.
3 An effective and efficient approach to process completion
Evaluating VfM as part of your organization’s business decision-making process doesn’t have to take a long time however it’s important to do it right. Many organizations choose to make their VfM evaluation process participatory in nature with a representative group of employees and stakeholders taking part in the process. Benefits of this approach include higher quality inputs and discussions, greater transparency in decision-making, and more realistic assessments of value for money outcomes.
To learn more about how a framework for VfM was used at the National Health Service, click HERE.
While realizing your goals for your value for money measurement efforts doesn’t have to be difficult, it’s important to approach the task in the correct way, allowing you to create and nurture a solid foundation for success. Being clear on your purpose for measurement and developing a consistent but flexible framework for assessing value for money, that uses the right metrics for that purpose, is a critical element for getting the most out of your VfM assessment processes.
However, equally important is building an organization that is ready, willing, and able to participate in, and leverage, value for money assessment processes and results when making regular business decisions. In fact, having this innate organizational capability is what sets the leading healthcare organizations apart. How do they create this capability? That’s the topic for my next blog post.
To learn more about how to measure Value for Money, check out the articles leveraged for this blog post:
“Measuring Social Value” Geoff Mulgan, Stanford Social Innovation Review, Summer 2010, http://www.ssireview.org/articles/entry/measuring_social_value
“Evaluation Methods for Assessing Value for Money” Farida Fleming, October 2013, http://betterevaluation.org/resource/assessing-value-for-money