The amount spent on health care in Minnesota and nationally is growing; but that information is not new. Health care experts, economists, policymakers and providers are currently, and have in the past, attempted a variety of methods to cut costs.
Some, including many in Minnesota, have been effective in curbing costs for particular types of care or in particular markets. However, we have been unable to truly assess whether those efforts add up to the societal impact we need them to because we have not been able to truly measure the cost of health care in Minnesota or the United States.
Without reliable, comparable and validated information, providers, health plans, employers, patients and policymakers cannot make informed decisions about how to reduce the cost of health care. Clinics are not aware of what one another charges for services or are being paid by health plans. Thus, they don’t really know where their practice stands on cost compared to others. Few providers have had the tools necessary to make adjustments within their practices to positively impact the overall cost of care.
Patients are also beginning to demand cost information. In 2014, 80 percent of workers in employer-sponsored health insurance plans had deductibles — up from 63 percent just five years earlier. As the burden of cost has shifted more onto consumers, their appetite for health care cost information has also increased.
Four Years of Hard Work to Create a Total Cost of Care Measure
By 2011, MN Community Measurement had pioneered the collection and public reporting of quality and patient experience measures; a cost measure was important to rounding out a Triple Aim reflection of health care in our community. Additionally, MNCM had begun reporting the cost of about 60 common medical procedures two years earlier. Thus, our community had experience aggregating cost data for public reporting.
MNCM, alongside stakeholders including providers, payers and consumers, began development on a stable, consistent cost of care measure to fill the gap in health care cost information. Through MNCM’s consensus-based, multi-stakeholder process, we were able to get broad agreement on a Total Cost of Care (TCOC) measure. More than 40 stakeholders worked for three years to develop, test and validate the measurement process and its results. Technical assistance and validation were also obtained from independent statisticians and local and national experts, including the National Quality Forum, the Network for Regional Healthcare Improvement (NRHI) and Johns Hopkins University.
No one had been able to create a TCOC measure before – because no one had been able to gain agreement on an approach. MNCM’s critical role led our community to gain broad agreement on a stable, repeatable, consistent cost of care measure.
First Year Results
TCOC evaluates all costs for commercially-insured patients over a 12 month period adjusted for diagnostic risk and assigned to a single medical group. It includes all medical costs involved with treating patients, including provider and facility fees, inpatient and outpatient care, pharmacy, lab, radiology, behavioral health services and other ancillary costs.
The 2014 Total Cost of Care Report was the first milestone in an initiative to publicly report reliable, comparable and validated information on health care cost. While we were the first to publicly report this information, we are not the only community on this journey. Minnesota is one of five communities participating in a project with the NRHI to develop standardized methods that will allow TCOC information to be shared in communities across the nation.
This report reflected the actual costs of 1.5 million patients insured by Minnesota’s four largest health plans, Blue Cross and Blue Shield of Minnesota, HealthPartners, Medica and PreferredOne in 2013 – totaling nearly $8 billion. The average TCOC in Minnesota was $435 per patient per month (pppm); $514 pppm for adult patients and $144 pppm for pediatric patients.
The average cost of the 115 medical groups reported ranged from $269 to $826 pppm on a risk adjusted basis. Many of the medical groups above and below that average range have unique roles in our community and would be expected to have unusual costs, such as teaching facilities on the high end and student health services on the low end. However, 80 percent of the groups were in the range considered average ($369 to $509 pppm). Most of the groups within this standard range are full-range primary care or multispecialty clinics, and yet still had a $1,500 difference per patient per year.
The numbers were staggering: if we reduced the average cost by just $12 per patient per month, more than $750 million would be saved each year in Minnesota alone.
This initial report reflected Minnesota’s initial TCOC benchmarks and began to point us in the direction so we as a community can reduce the cost of health care. While foundational, TCOC is only one piece of the puzzle that needs to be put together to slow the growth in health care costs.
Just Released: Second Year Results
The results of the 2015 Total Cost of Care Report were just released in September. They indicate that TCOC in Minnesota increased by three percent over the past year, while the average price of the most common tests, procedures and services provided in clinics increased by six percent.
$8.3 billion in health care costs that were accrued by Minnesotans during 2014 were evaluated by this measure, making itthe most in-depth, comprehensive assessment of the cost of medical care in the country.
The overall TCOC per commercially-insured patient per month was $449 in 2014, a $14, or 3.2 percent, increase over the previous year. This increase aligns with the overall Consumer Price Index for medical care services in Minneapolis, which increased 3.1 percent during the same period. Individual medical group results ranged from $298 to $823 per patient per month. The statewide average for adult patients was $529 per month and for pediatric patients was $225 per month.
“A difference of $1,700 per patient annually exists between the high and low cost providers,” explained MNCM President Jim Chase. “That’s a considerable difference in the cost of health care in our state – and that’s where the greatest opportunity for improvement exists.”
This year, the number of medical groups with TCOC data available increased to 132, representing 954 clinics, across Minnesota and neighboring communities. The information is available at MNHealthScores.org.
MNCM also released the average cost of the 85 most common medical procedures in ambulatory care settings, ranging from routine office visits and simple lab tests through MRIs and caesarean section deliveries.
For example, a rapid strep test can cost from $19 to $86 and a 15-minute office visit can cost from $76 to $157 for commercially-insured patients, depending on where they get care.
The average procedure cost represents the professional fees for the physician conducting the procedure or seeing the patient. The majority of procedures available from MNCM occur in the doctor’s office; thus, the cost will generally reflect the full cost of the service.
Seventeen new procedures were added this year, including lumbar spine MRI, Human Papilloma Virus vaccinations, psychotherapy office visits and echocardiogram. Particular emphasis was placed on expanding the cost information available for mental health visits and high-tech imaging.
A Level Playing Field
Everyone in Minnesota can benefit from reliable health care cost information that’s delivered in a comparable, consistent manner. We can all now use the same data to set improvement goals and measure whether we’re hitting them. Medical groups can see where they stand on cost and collaborate with other groups to see what’s working to improve the value of care. Policymakers now have a true measure of the cost of care in Minnesota so they can focus efforts and resources to lower it. Patients can see the variation in cost relative to quality and patient experience information. All of these efforts improve health and drive change in health care.
With Minnesota leading these efforts locally and nationally, it’s our hope that providers will soon have standardized tools and information to compare their cost and utilization patterns to others, and identify opportunities to get better value for their patients. That is when controlling, or even reducing, costs will truly begin to occur.
The Future of Total Cost of Care
Our Cost Technical Advisory Group is considering multiple options for future iterations of TCOC, such as the total cost of care for patient insured by Medicare or Medicaid.
Additionally, MNCM has already convened a multi-stakeholder group that is working to develop a companion to the TCOC measure that will evaluate each medical group’s relative resource use. There are two major inputs to total cost of care: average cost per procedure, or what medical groups are being paid for the services; and utilization, or how much they’re using the services. For medical groups, both pieces of information are important to understand how they can reduce their overall total cost of care. With both pieces of information, our community will be able to see both the overall cost and how efficient medical groups are being with their resources.