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First-In-The-Nation Health Care Cost Comparison Highlights How Utah Compares To Other Regions

Comparison of commercial health care costs is the first to use local spending data tied to actual provider practices

Jan. 24, 2017 / Salt Lake City — A first-ever comparison of what commercial insurers are paying for health care in different regions shows wide variation in spending. The report from the Network for Regional Healthcare Improvement (NRHI), a national organization of local health improvement collaboratives working to improve health care, analyzed spending by commercial health insurance plans in five different regions nationwide (Utah, Maryland, St. Louis, Minnesota and Oregon). Analysts found a whopping $1,080 yearly difference in the amount plans spend, on average, per enrollee, with a high of $369 per-enrollee-per-month in Minnesota and a low of $279 in Maryland. Utah lands in the middle at $348 per-enrollee-per-month.

"The purpose of this analysis is to test our ability to compare a standardized measure of total cost of care across communities and to highlight areas for improvement," said Juliana Preston, executive director of HealthInsight Utah. "Knowing this variation in health care spending exists across regions, helps us understand savings are possible and essential to better manage and control costs not only nationally, but here in Utah."

Regional variation on medical spending has long been shown to exist in the Medicare market, but differences in the amount commercial insurers pay for care has been difficult to decipher, because multiple insurance plans participate in a single market.

The cost comparison was based on five regional health improvement collaboratives, including HealthInsight Utah locally, producing cost data using agreed-upon measures approved by the National Quality Forum (NQF). Data generated include information by region on the price of health care service (i.e., price), how much those services were used by beneficiaries (i.e., utilization), and a combination of price and utilization (i.e., total cost). Additionally, data on price, utilization and total cost were broken down by inpatient, outpatient, professional and pharmacy services.

As consistently reported by a number of sources using disparate methodology, Utah's average risk score is lowest of the five regions, reflecting its relatively healthier population. Total cost of care resource use and price indices place Utah in the middle of the group. HealthInsight Utah and the Utah Department of Health, Office of Health Care Statistics (OHCS), partnered to use the state's All Payer Claims Database (APCD) and extensive quality assurance processes to validate the claims data used to produce these indices for the benchmark comparison project and will continue to evaluate within-state variation across clinics and associated cost drivers. This is the first time Utah's APCD has been used to calculate health care costs using a NQF-endorsed measure, and HealthInsight Utah and OHCS plan to continue to produce total cost of care annual reports and trending in coming years.

Total Cost Index and Resource Use Index Commercial Population 2014
This work is based on the patented algorithm of HealthPartners, Inc. (Bloomington, MN) and is used with their permission.
PMPM = Per member per month; TCI = Total Cost Index; RUI = Resource Use Index; Price Index: TCI divided by RUI

"The Utah Department of Health was excited by the opportunity to help develop apples-to-apples health care cost comparisons because one key to understanding how to effect change is understanding where there are opportunities to improve," said Norman Thurston, director, Office of Health Care Statistics, Utah Department of Health. "The tools developed in this project will be critical to future efforts to document opportunities to increase efficiency and value in our own health care system."

NRHI experts say the data show significant opportunities to curb costs in a single region. If the two regions with the highest cost per participant (Minnesota and Oregon) reduced spending by as little as 2.5 percent—or roughly just $9 per enrollee, per month—employers and private purchasers in these regions would save more than $200 million annually in health care spending. Consumers and communities would also save on out-of-pocket costs that could be better used to strengthen their neighborhoods.

"Identifying regional differences in health care costs is important because high costs are depleting family budgets. Entire communities pay the price as money that could go to schools, housing and other needs are instead eaten up by health care costs," said Elizabeth Mitchell, president and CEO of NRHI. "This information will enable physicians to identify cost drivers, address them and get better outcomes. This enables a transformation in health care delivery, enabling better care decisions while potentially saving individuals, employers and other private payers hundreds of millions of dollars."

Mitchell says the prospect of these data being available more broadly has the potential to change the way all stakeholders operate within the health care system.

  • Employers and other commercial health insurance purchasers can use the data to negotiate better contracts with insurers and providers to ensure the best possible care for employees at a more competitive cost.
  • Patients will finally have the reliable data needed to make informed choices about their health care, providing them an opportunity to save themselves and their communities from paying unnecessarily high health costs.
  • Providers can use the data to make referrals based on costs, potentially steering patients away from specialists and other providers who cost more than their peers.
  • Health plans can use the data to evaluate providers based on value—a combination of cost and quality of care.
  • Policymakers can use the data as reliable, transparent, objective information as they craft policy.

The data are detailed in From Claims to Clarity: Deriving Actionable health care Cost Benchmarks from Aggregated Commercial Claims Data, which was developed with support from the Robert Wood Johnson Foundation.

About HealthInsight

HealthInsight Utah is a nonprofit, community-based organization, working to improve health and health care for patients and providers, and a recognized leader in quality improvement; transparency and public reporting; use of health information technology; engaging patients and communities to improve their health; and redesigning how care is paid for and delivered. HealthInsight Utah serves as a catalyst, using collaborative efforts to facilitate and promote the quality and safety of health care to achieve improved outcomes and value for all Utahans. Learn more at healthinsight.org and follow HealthInsight on Twitter at @HealthInsight_.

About NRHI

The Network for Regional Healthcare Improvement is a national organization representing over 35 regional multistakeholder groups working toward achieving the Triple Aim of better health, better care, and reduced cost through continuous improvement. NRHI and all of its members are nonprofit organizations, separate from state government, working directly with physicians, employers, hospitals, health plans, and patients using data to improve health care. For more information about NRHI, visit www.nrhi.org. Follow NRHI on Twitter at @RegHealthImprov..

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 https://twitter.com/RWJF or on Facebook at https://www.facebook.com/RobertWoodJohnsonFoundation/.