HEALTHCARE COST DISPARITIES ACROSS STATES DRIVEN BY DIFFERENCES IN CARE PATTERNS AND PRICE
New Healthcare Cost Comparison Reveals Regions’ Cost Drivers, Lays Groundwork for Local Solutions
February 13, 2018, Portland, ME — The considerable differences between the total cost of healthcare in five states is largely driven by local patterns of healthcare usage and pricing. These regional differences are explained in a report released today by the Network for Regional Healthcare Improvement (NRHI), a national non-profit representing regional health improvement collaboratives (RHICs) and state partners working to achieve better, more affordable healthcare.
Healthcare Affordability: Untangling Cost Drivers, is NRHI’s second annual report comparing the total cost of care for those with private insurance in various U.S. regions. The report uses the average cost of healthcare for comparable populations as its benchmark, and compares each state to that average. Like other recent studies, Untangling Cost Drivers finds that healthcare costs vary widely between states. The NRHI report, however, digs into the “why” and reveals how different care delivery patterns and local prices contribute to the significant cost differences between Oregon, Utah, Colorado, Minnesota, and Maryland.
“With one of every six dollars in the American economy going to healthcare, it’s imperative that we determine what is driving healthcare costs,” said Elizabeth Mitchell, president and CEO of NRHI. “You can’t fix what you don’t understand, but with reliable and actionable information on cost drivers we can enable healthcare stakeholders to make the changes needed to bring down the cost of care.”
Each state’s numbers tell a story, giving stakeholders insight into the role that local policies, demographics, and market factors play in driving healthcare costs. This knowledge can enable them to take steps to address their specific issues. For example, the report finds that in Colorado, the high use of outpatient services had the greatest impact on its total cost. And while Utah, with the nation’s highest birthrate used inpatient resources significantly more than the average, its lower prices contributed to a below average total cost of care.
Across states, inpatient care saw the greatest variation in price. Hospital prices were 16 percent higher than the benchmark in Oregon and Colorado, compared to 12 and 14 percent below average in Maryland and Utah, respectively. This variability occurred in every category of care except pharmacy pricing, which is largely attributable to the influence of a few, large pharmacy benefit managers and pharmaceutical manufacturers’ national pricing policies.
“When we isolate the two predominant cost drivers – price and resource use – we can help stakeholders understand how their actions, choices, and policies contribute to the overall cost of care,” said Mitchell. “America’s healthcare cost crisis will not be solved by data – but it cannot be solved without it.”
Mylia Christensen, executive director for HealthInsight Oregon and Q Corp, which participated in the project, said the studies provide location-specific, actionable information that stakeholders can use to change the way they deliver, purchase, and consume healthcare. “Every day we are bombarded with thousands of pieces of information about the growing challenges of delivering high quality, affordable healthcare across the U.S. The benchmark report is critical to increasing our understanding of current costs, but most importantly, it provides comparative information to work on real solutions for our communities. The data show that the right solution in Oregon may not be the same as Colorado or Maryland,” said Christensen. “This report, coupled with our regional Total Cost of Care work, furnishes a new compass allowing us to focus and understand what is working, or not, to reduce healthcare costs and improve the health of our communities.”
NRHI has collaborated with several of its members on its Total Cost of Care initiative since November 2013. The national comparison detailed in this report is supported by practice-level reporting that each member does in its region. Four of the five states participating in the 2015 effort also participated in the 2014 benchmark study released by NRHI in January 2017. With the publication of this report, NRHI now has two sets of regional cost comparisons, and another round is scheduled for release in late 2018. With three years of data, trends will begin to emerge to support existing hypotheses and/or challenge long-held assumptions.
Healthcare Affordability: Untangling Cost Drivers was developed with support from the Robert Wood Johnson Foundation. The report can be found at https://www.nrhi.org/uploads/benchmark_report_final_web.pdf.
The Network for Regional Healthcare Improvement (NRHI) is a national membership organization of regional health improvement collaboratives (RHICs) and partners across the United States. Our members work in their regions, and collaborate across regions, to transform healthcare and achieve better health, and high quality affordable care.
About Robert Wood Johnson Foundation
For more than 40 years the Robert Wood Johnson Foundation has worked to improve health and health care. We are working with others to build a national Culture of Health enabling everyone in America to live longer, healthier lives. For more information, visit www.rwjf.org. Follow the Foundation on Twitter at www.rwjf.org/twitter or on Facebook at www.rwjf.org/facebook.