Total Cost of Care: Understanding Drivers and Measuring Performance

Healthcare spending in the United States is a serious problem, but certainly not a new one. According to CMS annual national health expenditure projections[1], the U.S. will be at an enormous $6 trillion in healthcare spending by 2027. This unsustainable growth rate, along with an aging population and advances in life sciences, places additional cost strains on the health system.  Medical advances and longevity lead to an increase in unit price, shifts in costs across care settings, increased out-of-pocket expenses, and more.

Governmental agencies realized something different had to be done, and have stepped in to place significant demands on the healthcare system. These mandates continue to advance into more progressive forms of payment arrangements aimed at reining in the unnecessary spending occurring within the healthcare ecosystem. But essential to making a real difference is uncovering inefficiencies within care delivery and providing visibility into cost drivers that are inconsistent with fellow peers.  The necessary complexity is applying methods that ensure fair and accurate measurements that make it all possible.

As I discussed in our "Total Cost of Care" webinar with Adele Allison, the significant variation in the cost to treat a patient is a complex problem. Costs per-member per-month to treat populations of comparable health vary considerably across the region, as outlined in a Network for Regional Healthcare Improvement (NRHI) study.[2] This study, sponsored by the Robert Wood Johnson Foundation, measured the cost of care across six regions over a three-year period.  One finding discovered the cost to treat a population in Colorado was 19% above average, while it was 20% below the average for a comparable population in Maryland. Drilling further also identified significant variation within the states themselves. There are understandable explanations for some of the variations, such as urban versus rural or mountain areas, and specific state mandates. However, greater consistency in the cost for care is sorely needed because the unforgiving reality is this cost variance does not guarantee better care, healthier outcomes, or increased consumer satisfaction.

In order to achieve consistency, we must first be able to fairly and accurately measure and track performance. The Total Cost of Care methodology developed by HealthPartners in Minnesota allows us to do just that. For a study methodology, NRHI selected the HealthPartners Total Cost of Care metrics. These metrics received multiple National Quality Forum (NQF) endorsements. They leverage The Johns Hopkins ACG^® System, which is the leading population-based risk adjustment methodology for ensuring accurate illness burden adjustments. As part of the NQF endorsement, the measures underwent rigorous scientific testing to ensure they are substantively meaningful and related as intended. The metrics are displayed as a set of indices, so peer performance can be displayed without exposing proprietary information such as fee schedules, thereby facilitating transparent data sharing. The measures also contain peer grouping controls for various patient demographics, provider types, and multiple product lines. All of this helps ensure metrics are valid and actually measure what they are intended to measure. The metrics have also proven they are reliable and can stand the test of time, as HealthPartners has had them in place within their practice communities for decades. The use of these NQF-endorsed metrics ensures validity and reliability, which are of utmost importance when benchmarking, as gaining physician trust and buy-in is a crucial step.

The Total Cost of Care measures help us gain the needed visibility into the complete picture by allowing us to dive into detailed cost drivers that reveal areas of opportunity to impact cost or adjust utilization.  We must understand cost drivers in order to inform strategies that will help bring these costs in line over time. Payers and providers must work together to uncover the root causes behind these cost drivers and gain perspective on how their performance and practice patterns compare to peers.  This is imperative for ensuring accountability for overall cost-effectiveness.

We have made the HealthPartners NQF-endorsed methodology available through our Total Cost of Care (TCOC) module, the latest licensed component within our SS&C® CareAnalyzer platform. SS&C® CareAnalyzer was included in a field of potential solutions delivering population health analytics and was named as a Major Player in the IDC MarketScape: U.S. Population Health Analytics 2018 Vendor Assessment.