Value-Based Care

The Case for Change

Variability in Practice of Care

There is significant and dramatic variability in practice patterns and resource utilization in the treatment of patients for the same ailments. Clinical outcomes could be improved by collaborative initiatives to adopt evidence- based best practices.

C-section rates vary dramatically across and within states

One example of a highly variable practice is maternity care. Over the past 20 years, cesarean section (C-section) rates have risen over 50%, and maternal morbidity rates have doubled. Despite plummeting quality, U.S. birth costs have increased by 50%. A C-section costs commercial payers $10,000 more than a vaginal birth. For more information, check out the Purchaser Value Network Maternity Toolkit.

Cost Variability

For many health conditions, there is wide variation in the cost of care, and higher prices are not linked to better care or patient outcomes.

For example, the cost of a joint replacement could be anywhere between $15,000 and $110,000, without any correlation to quality.

Health Care Spending

Health care costs are strangling our economy, costing more and delivering less each year. The United States consistently ranks much higher than peer nations in health care spending, and ranks much lower in health care outcomes.

Health Care Spending as % of GDP

Of the 34 developed countries of OECD, the United States spends the most by far – over $3 trillion per year on health care, amounting to more than 17% of our GDP – 5% more than the next closest country and almost double that of the average of other OECD countries. Americans on average spend $9,523 per person per year on medical expenses, with out-of-pocket costs amounting to just under 3% of total household budgets, compared to 1.5% in Britain, France and the Netherlands.

Health care spending is rapidly crowding out other national priorities

Congressional Budget Office: 2017 Long-Term Budget Outlook

Spending on health care entitlements as a percent of GDP has risen from 2.1% in 1987 to 5.5% in 2017, and in the next ten years is projected to increase to 6.9%. One study showed that a 10% increase in excess growth in health care costs would have resulted in 120,803 fewer jobs, $28 million in lost gross output, and $14 million in lost value added in 2005.

If American Medicare expenditures saw the mid-point of savings (6%) achieved by value-based payment models, they would save $36 billion in one year — roughly the entire budget for the Department of Homeland Security.

Using Massachusetts as a case study, the state’s spending on health care coverage has increased by $5.1 billion (or 59%) from 2001 to 2011, while its spending on other priorities such as public health, education, infrastructure, local aid and public safety have collectively decreased by $4 billion (or 20%), according to Harvard University’s David M. Cutler.

Front-line lessons from change agents

Read about Value-based Care Innovations