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"The two words ‘information’ and ‘communication’ are often used interchangeably, but they signify quite different things. Information is giving out; communication is getting through." -- Sydney J. Harris

How Total Cost of Care Transparency Aids Payment Reform

By Verna Gruessner, HealthPayer Intelligence
December 10, 2015

“Having a broader picture of the cost is critically important… Practices can compare themselves to others and take action to reduce overall costs.”

What’s the first step in addressing methods for reducing medical costs and strengthening healthcare delivery? Improving transparency behind healthcare spending as well as educating stakeholders in the financial aspects of the medical industry is one of the very first steps to take.

In pursuit of this goal, the Network for Regional Healthcare Improvement (NRHI) has brought a tremendous amount of energy to leading the Total Cost of Care project, which aims to identify the entire cost paid for healthcare services received at the individual level in a given period of time.

In order to gain more background on the Total Cost of Care project, HealthPayerIntelligence.com spoke with Ellen Gagnon, Senior Project Director for the Network for Regional Healthcare Improvement.

Total healthcare costs impact consumer decisions

When asked about the effect that the Total Cost of Care project will have on consumer choices for healthcare providers, Gagnon answered, “The Total Cost of Care measure created by HealthPartners produces an index that allows for comparisons among physician practices.  The output of the measurement process – the total cost index and resource use index – shows how a physician practice performed relative to others”

“You can develop a benchmark within a data set. For example, our pilot sites produced total cost of care within their state or region. The output of the measure is an index to compare practices against a benchmark. For example, a particular practice might have a total cost index of 1.05, meaning they’re 0.05 higher than the average or they might have 0.75 meaning they’re 25 percent lower than the average practice.”

“You can imagine that for a consumer, this is healthcare and measure jargon so requires some translation and two of the pilot sites have  consumer-facing displays of that information as one data point to be used in healthcare decision making.”

“Minnesota Community Measurement (MNCM) has twice publically reported per member per month dollar figures for large medical practices throughout the state of Minnesota and compared them against each other. They use a rating system of below average, average, or above average to help consumers make sense of the data.

“A consumer can go to their website and look at information about how well a practice manages their cost and resource use. One important point, something all of our participating regions promote and encourage, is that quality must be considered when making decisions about to go for care so quality ratings are reported alongside cost.”

“It is helpful and informational, but is not the total picture. This is a very important message for the consumers. When married with quality information and patient experience ratings (how other patients have rated a provider), that is how the cost measures can be used among consumers to make some key choices.”

How total cost of care affects payers

When asked whether payer decisions regarding choosing providers for their network is affected by the Total Cost of Care project, Ellen Gagnon responded,

“Individual payers – almost all of the large payers – have data to calculate similar measures. They may not use the term Total Cost of Care, but they’re calculating within their own network of providers and is limited to their membership.”

The measures from the Total Cost of Care project, combined with quality and patient experience information, could be incorporated by payers when “designing a network based on a larger set of information as opposed to just their own network of providers.”

Benefits of expanding Total Cost of Care project

The Network for Regional Healthcare Improvement is expanding the project across additional regions. This expansion in part supports “more standardization and alignment of measures.”

“There are many different measures available to payers and provider, this makes it difficult for stakeholders to determine which rating is the best or even accurate,” Gagnon clarified. “We’re trying to promote the use of a standardized measure set to help reduce confusion and variation which detract from credibility.”

“The more regions we work with and help bring together, the easier it is to analyze the data and use it effectively instead of having 15 different ways to measure total cost of care. As we move into consumer-driven healthcare, and CMS, the largest purchaser of healthcare, shifts from volume to value-based payment systems, understanding population health will become vital.  ”

“Having a broader picture of the cost is critically important,” she explains. “The total cost of care measure enables you to see the entire cost and drill down and see how much is being spent on in-patient, out-patient, pharmacy, and professional services. Practices can compare themselves to others and take action to reduce overall costs. Different stakeholders can use it for different purposes including comparing various types of services or even population health costs.”

2016 goals for Total Cost of Care project

When it comes to next year’s goals for the project, NRHI will be busy in 2016. Gagnon stated, “We will continue to refine our work and continue to improve our data collection and data quality analysis. Also, we are exploring how the measure can be used with Medicare and Medicaid populations.”

“We will work on expanding to Medicare and Medicaid and also look to deepen our stakeholder engagement. Our reports are only as good as they’re being used. We want to make sure that physicians and other stakeholders can embrace our data and use it effectively.”

“Given the move from volume to value-based payments, there is more desire from providers to better understand total cost of care. We will continue to work with our physicians and payers to support them in this effort. Part of our work ahead in 2016 is how to better package what we’ve learned in a way that’s more easily consumed by regions interested in cost of care”

“We believe it’s not just a measure,” Ellen Gagnon declared. “It’s an approach to establishing a measurement program by working very collaboratively within your community, and seeking input all along the way on how it can be useful. Our approach is focused on engaging all stakeholders in the community.”

How will greater cost transparency lead toward healthcare payment reform?

“Some of those most impacted by payment reform are within the provider community,” she explained. “One of the levers in implementing payment reform is reimbursement. As I mentioned, when CMS starts to move toward value-based payments and considers ways they will reimburse physicians in the future, this [measure] will help providers better understand how they are performing against others.”

The results of this project will “give providers the information they need to better understand how their healthcare delivery compares to others.  This feedback can help change behavior or practice patterns.”

“Physicians need this information to know what to change and how to effectively perform in the emerging world of payment reform. Payment reform encompasses a lot of different mechanisms, but this is a key measure that will help providers perform better in that world as it continues to evolve,” Gagnon concluded.

Read the HealthPayer Intelligence article