What is Driving Total Cost of Care?

In a combined quantitative and qualitative analysis of factors that may be influencing total cost of care in healthcare markets across the United States, researchers from the Healthcare Financial Management Association (HFMA), Leavitt Partners, and McManis Consulting found that:

  • The penetration of population-based value-based payment (VBP) models is not yet having an impact on curbing growth in total cost of care. The efficacy of these models in reducing growth in total cost of care has not yet been proven, however, as even in markets where these models are more prevalent, most models do not yet incorporate sufficient financial incentives to impact care delivery significantly.
  • Although more time and evidence are needed to prove the efficacy of population-based VBP models, there are other models that may be more appropriate for different populations. Alternative VBP models of interest to stakeholders interviewed for this study include episode-based payments, reference-based pricing, on-site health centers for employers and their employees, consumer-driven models tied to more effective transparency tools, and models that target the needs of specific patient populations.
  • The question of “what type” of competition may be more important than “how much” competition. Lower-cost markets appear to benefit from competition among healthcare systems with well-organized provider networks and geographic coverage across their market. Health plan competition also appears to be a significant factor, especially with respect to encouraging innovation in payment models and plan design within a market.
  • Lower-cost markets also appear to benefit from organized mechanisms, including state-sponsored or endorsed reporting agencies and employer coalitions, for more transparent sharing of information on provider quality and costs. Interviewees also believe that greater transparency of quality and cost information for consumers is necessary, while acknowledging that transparency tools that have been offered thus far have had limited impact.
  • Healthcare leaders across markets believe that further changes to payment and care delivery models are inevitable and will likely include value-based components. In most markets, however, it is not yet clear what or who will be the catalyst to push further change.

 

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