Value over volume – how Penda is leading the way on value-based healthcare

By Rob Korom, Chief Medical Officer, Penda Health

In Kenya, most of us have friends and family members who have left a hospital or clinic with tons of labs and a small drug store for a simple cough. It’s no surprise that we as patients frequently feel frustrated and taken advantage of by the healthcare system.

This feeling isn’t wrong – incentives within the health system are poorly aligned.  Doctors and hospitals make money by doing more – ordering more lab tests, more ultrasounds or x-rays, and prescribing more drugs.  At the end of the day, patients have spent a lot of money, but have they actually gotten any better?

Current incentives in healthcare focus on profit over outcomes.

In my last post, I discussed how children with diarrhea receive improper care more often than not: fewer than 40% receive Oral Rehydration Salts (ORS), and only about 1% receive zinc sulphate – the proven therapy for reducing the duration and recurrence of symptoms.

Now consider how much a healthcare provider can make from selling a course of Augmentin (about 2000 KSH), as compared to selling ORS (50 KSH) and zinc (100 KSH).  Under a fee-for-service system, prescribing Augmentin is far more lucrative than prescribing the evidence-based (but cheaper) treatment for diarrhea. Why provide the right care when it makes you less money?

We need to compete on VALUE instead of VOLUME.

Harvard Business School Professor Michael Porter coined the term “Value-Based Healthcare,” or VBHC, to describe a system whereby healthcare providers compete on value, as opposed to the fee-for-service approach that favors high-volume care. Value-based healthcare is simple: it means that we aim to achieve the highest quality of care for patients at the lowest cost. But the challenge lies in implementation.

Note: Penda’s leadership has attended the HBS short courses on Value-Based Healthcare in Boston and we’re eager to connect with others who are interested in the concept!  

Penda Health is implementing value-based healthcare within our chain of 20+ medical centres across Nairobi.  

Penda Health assesses the “quality” part of the value equation by consistently measuring the following:

• Patient experience: For every visit, we send our patients a single message: “How likely are you to recommend Penda to a family member or friend?”  This single broad metric (the Net Promoter Score) is a terrific marker of overall patient experience.  Our network-wide average NPS of >55% is orders of magnitude higher than the industry average for healthcare in Kenya of -5%.

• Adherence to validated process measures:  As outlined in my post about how Penda uses technology to achieve high-quality care, we continuously and automatically measure dozens of well-validated process measures for quality care in the primary care setting.  We pride ourselves on high adherence to such metrics, including treatment of acute conditions like malaria to diagnosis and management of chronic illnesses like hypertension.

• Patient outcomes:  As critical as adherence to process measures is, we need to make sure our patients are actually getting better.  We ask our patients a simple question in our routine follow-up calls:  “Are you feeling better from when you first came in?”  This data helps us to identify early any patients who are not getting better as expected as well as to analyze why some patients seem to improve more than others.

On the “cost” side, we are also able to gather many insights. Our end-to-end electronic medical record not only gives us precise costs for pharmaceuticals and diagnostic tests, but also detailed human resource costing for a patient visit.  Time-Driven Activity-Based Costing is a method of allocating detailed staffing costs to specific patient visits.  Since our electronic medical record automatically records the time spent with the patient by each staff member down to the second, we’re able to know with a high degree of certainty how much various visit types cost Penda.  While we don’t charge patients according to the amount of time spent, these insights help us optimize our operations and reduce overall costs.

We are leading the shift from fee-for-service (volume) to capitation (value).

Ultimately, our aim is to shift from a fee-for-service model to a capitation model, and we hold ourselves responsible for prioritizing outcomes over profit. Penda aims to be Kenya’s national leader in outpatient capitation models because we excel at providing outstanding quality and outcomes while maintaining extremely low costs.  Under capitation, payers or patients pay us a set amount for unlimited coverage over a one year period – a system that prioritizes efficient, high-value care instead of volume of services provided.  

We now have several capitation agreements with various payers, ranging from commercial insurers to large corporate clients.  Our capitation partnership with the government payer, NHIF, is our largest and most successful capitation model to date!  Patients under these agreements love that they can access high-quality care anytime without a copay, can take advantage of any of our 20+ branches around Nairobi, or call our telemedicine hotline Pigia Penda. Payers love that they have predictable, fixed costs for the entire year and that their patients have access to high-quality care.

Leading the way, Penda Health hopes that more of the Kenyan healthcare market will take notice and align incentives to produce value for patients over volume of services.