More than a decade of spiraling healthcare inflation combined with fiscal contraction and stagnant wage growth have put the cost of care in the spotlight.  Payers and employers are increasingly looking to reduce their healthcare expenditures, while still obtaining high quality care for their subscribers and employees.  Simultaneously, there is a convergence of trends, including a drive toward transparency that is encouraging more patients to shop for healthcare, seeking treatment options that can provide better outcomes at lower costs.  With all of these stakeholders feeling the economic crunch and with the move toward reference pricing and ultimately capitation, the stage is set for commoditization of healthcare.

As the industry evolves toward payment based on value rather than volume, both the function and the form of hospitals and health systems are changing.  To avoid commoditization, providers must be able to build a data-based case for the value of their care model and develop the necessary tools to communicate this value to both payers and employers.  Here, a critical piece of the solution is the systematic development of a narrative that can justify differentiated pricing based on superior value.  Although there will always be insurers that are only concerned with the “bottom line,” there are others that are willing to pay for value, especially when that value is clearly supported by evidence.  Those hospitals that have a clearly defined value proposition will be well-positioned to monetize the value of their care model and achieve optimal reimbursement and market share.