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Proving Value: How It Can Work for You—and Employers

Philip Betbeze, for HealthLeaders Media, August 13, 2013
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Walmart's spine and heart programs are based on the transplant Centers of Excellence program—with a wider choice of health systems. Emerick says Walmart, after seeing the success of the transplant program, clearly set out to discover what other high-cost healthcare diagnoses were driving up their healthcare costs. Beginning in 2005, Scarrow and his colleagues were seeking that answer as well with an idea that they could compete with other providers on value.

"We knew the high cost of spine care, and we would go out to local businesses to talk about value and utilization using our own outcomes data," says Scarrow.

What Mercy Springfield had, they soon realized, was a resource that many other healthcare organizations lacked, because the financial payoff for outcomes data in 2005 was uncertain.

"We had been doing outcomes for surgery patients since 2005," Scarrow says. "But no one gets paid more for outcomes at the 90th percentile than at the 50th. As a result, most hospitals and health systems have not invested a lot in outcomes. We had that data."

Mercy made the investment in data because it thought local large employers would be interested. The data was compelling. Scarrow says Mercy surgeons (all employed) noticed how widely the costs for spine treatment varied, and it wasn't based on severity of illness.

"There is a twentyfold difference in lumbar spine costs," he says, "but it's impossible that there is a twentyfold difference in incidence of disease between the highest and lowest utilization area. The question we were trying to answer was what level of utilization is reasonable?"

Overutilization, while especially prevalent in spine care, is an industrywide problem, says Scarrow, and a key factor in healthcare costs that continue to outstrip the rate of inflation for the rest of the economy. He says to provide cost-effective treatment and prevent overutilization, a hospital or health system has to combine three factors: highly ethical care, high-quality outcomes, and a reasonable price. Until recently, most hospitals and physicians haven't been interested in cutting utilization because it has the pernicious effect of cutting their reimbursement. But employers and payers are getting smart about this problem, and hospitals and health systems that can effectively manage utilization have a huge head start on their peers.

"There is an ethical overlay to this," Scarrow says, regarding surgical intervention, especially in heart and spine care. "You can justify a number of things to do interventionally, but what is really evidence-based for that patient?"

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