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Wanted: Evidence That Improving Quality Cuts Costs

Analysis  |  By Tinker Ready  
   May 12, 2016

There's hope. And there's reality. On close inspection, the link between cost and quality is actually pretty fuzzy: We just don't know.

One of the incentives for improving the quality of healthcare is the notion that it will also lower costs.

Ideally, patients will have a medical home to go to instead of an emergency room.

Ideally, physicians will choose treatments wisely instead of ordering expensive, low-value scans and lab tests.

Hospitals have already reduced avoidable readmissions. That suggests they got care right the first time and equals real money. Result: Lower costs, better quality.

But on close inspection, the link between cost and quality is actually pretty fuzzy.  

Some say there is little evidence to support the idea that better care will cost less. It is possible that better quality and high costs can be tackled at the same time.

We just don't know.

And, in cases where one doesn't lead to the other, it may not be realistic to think a single strategy will get the job done. 

Two recent studies touch on the issue. A review of five routine, but high-volume clinical encounters, such as asthma evaluation, found no correlation between price and quality.

In another study, University of Michigan researchers looked at payments by the Centers for Medicare & Medicaid Services after the agency added a price metric to its Hospital Value-Based Purchasing (HVBP) program last year.

By adding a spending measure, the HVBP program reduced the weight of its quality measures, according to the study published in Health Affairs. As a result, the agency ended up awarding bonuses to scores of hospitals with low costs but low quality.

The HVBP issue might be something that can be fixed with a change to the formula or, as the paper suggests, a minimum quality threshold.

But the findings suggest that striking the right balance between cost and quality can be tricky.

Evidence Lacking

There has been widespread hope among health policy makers that improving quality would reduce spending, says Andrew Ryan, PhD, of the University of Michigan School of Public Health.

"Although it sounds reasonable, there is almost no evidence that that is actually true," says Ryan, one of the HA study's authors. "Particularly in the US, improving quality involves increasing spending and it often involves increasing costs to providers."

Often, those providers are not able to get reimbursed for their efforts, he says.   

The relationship between cost and quality remains "poorly understood," according to a 2013 Rand Corporation review, commissioned by Robert Wood Johnson Foundation.

The researchers examined 61 studies:

  • One-third of the studies found an association between higher cost and higher quality.
  • One-third found an association between higher cost and lower quality.
  • One-third found no association between the two.

A smaller, more recent analysis looked at the quality and price of five measure:

  1. Asthma evaluation
  2. Diabetes evaluation
  3. Hemoglobin tests
  4. Hypertension evaluation
  5. Creatinine tests

The study found "no consistent relationship between quality measures and price." In some cases, higher prices were associated with lower quality.

The analysis was conducted by the Healthcare Cost Institute, a coalition of insurers who pool and analyze claims data: "The takeaway is that price as a signal of quality is potentially misleading," says Eric Barrette, PhD, MA, the group's research director.

The study has its limitations.  The group used state-wide quality measures, which may differ from other measures. In addition, it used claims data, not clinical data, he said.  

"While I think that this is informative, it really is just one more piece of information or one more data point in the question of price-versus-quality," Barrette said.

An Abundance of Data

For consumers, sources of information about quality and cost abound, but usually not in the same place or package.

Numerous web sites, both public and private, now offer information on costs of various procedures. Several organizations, including Medicare, offer quality data on hospitals.

And physicians, in this case surgeons, have seen measures of the quality of their care teased out of the Medicare database by a group of journalists. (Some said the data reporters at Pro Publica were in over their heads; others praised the effort for filling a vacuum.)

Starting this winter, the state of New Hampshire began offering consumers information on both price and quality. But, not for the same services.

The New Hampshire Health Costs site allows user to plug in information about their insurers and copays and get an estimate on the cost of care for both medical and dental procedures. It also compares prices of prescription drugs at different pharmacies.

In terms of quality, it offers a carefully selected list of hospital quality measure, including heart attack care, patient satisfaction, and readmissions. The site also identifies the sources of data, including CMS and The Joint Commission.

"This is the first step in trying to get quality information out there," says Maureen Mustard, the director of healthcare analytics at the New Hampshire Insurance Department.

"We're optimistic. There is a lot of work being done around quality.  There will be more and more measures available, and hopefully they'll have physician information and more procedural information that will relate much better to the cost estimates that we provide."

Ryan, of the University of Michigan, is optimistic too. Medicare is trying numerous approaches and researchers are trying to figure out what works and how to scale it up.

"Hopefully, over the next five or ten years, we are going to learn from all these experiments and come to a consensus about the best way to design these programs that is consistent with the interest of Medicare, [and] is consistent with patient preferences and consistent with professional norms of healthcare providers."

Still, for hospitals, it is a time of great uncertainty, he says.

None of them really know how the shift away from fee-for-service, and the quality measures that come with it, is going to change their core business. 

"There is a whole range of responses: people clinging to the old business model, people going gung ho to alternative payment models. Most hospitals are somewhere in the middle," Ryan says.

"They don't want to be left behind as the system transforms overnight. Hospitals are used to operating a certain way and generating revenue in a certain way.  Many are trying to figure out how much they really need to change to excel in the new world and how much the new world is going to change what they do."

For the here and now, many have managed to reduce hospital-acquired infections and readmissions.  

Ryan says that it does look like shift in the readmissions has saved money: "How much readmission actually reflect healthcare quality versus utilization or spending is a controversial issue. But in general, that has been an effective intervention and you could argue it is addressing quality and costs at same time." 

Tinker Ready is a contributing writer at HealthLeaders Media.

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