The Complex Relationship Between Healthcare Cost and Quality Outcomes

The American healthcare market is flawed. The United States spends 17% of GDP on healthcare, the highest among developed nations. Despite this, Americans do not enjoy superior health outcomes compared to the citizens of those other countries. This combination of high costs and mediocre outcomes undermines the economy and threatens the well-being of the millions of Americans who can’t afford proper care. With the US struggling to address its high healthcare costs and poor health outcomes, it is important to ask: which of these two problems should draw our attention first? Do we need to focus on one at the expense of the other?

Our experience at Enlace Health has proven that with a focus on value-based care you can greatly improve the quality of care while also saving an average of 20% of the cost.

Can Money Buy You Better Healthcare?

Examining the healthcare industry through a cost-focused lens reveals a disturbing trend. Per capita medical care cost, already among the highest in the world, has grown by 3.5% annually, and is likely to continue increasing. One of the primary contributors to this increase appears to be ballooning administrative costs. The United States spends $937 per person each year on administrative costs, four times the average of most wealthy nations. Furthermore, the price of medical care in the United States is higher even when controlling for utilization rates. Historically, most cost-oriented approaches to addressing these issues have relied on government intervention to regulate the healthcare market. These endeavors include the expansion of Medicare and the proposed adoption of a single-payer healthcare system; options which have gained traction in the national discourse recently. However, the current political climate casts doubt upon the likelihood that a comprehensive policy solution will be implemented in the United States in the near future.

Policy initiatives to make healthcare more affordable are typically popular among the American public, but electoral politics and policy are becoming increasingly disconnected as more Americans vote along party lines no matter what. This hyperpolarization of the two dominant political parties protects politicians who refuse to author or vote on bills that have majority approval among the American public . Since it appears unlikely that there will be an overhaul of the existing system, other levers need to be considered. Costs can be lowered by reducing the number of services provided to patients but valuing lower costs in the absence of other considerations provides little insight into which services are vital and which are expendable. Focusing on reducing healthcare costs alone attends to the symptoms of a broken system, without addressing the underlying causes.

What If We Prioritized Quality Outcomes?

A focus on quality outcomes achieves improved healthcare outcomes and lowers costs by incentivizing the most efficient and effective treatment options. Rather than seeking to maximize profits by increasing the number of services provided to patients, healthcare providers work with insurance companies and payers to identify and pursue the most cost-effective treatment plans with quality in the forefront. These Value-Based Care (VBC) agreements eliminate unnecessary services, reduce administrative costs, and increase quality of care which, in turn, reduce cost without having an adverse impact on patients’ health.

Enlace Health clients have experienced first-hand the benefits of value-based care programs. On average, our partnerships have reduced medical costs by 15% to 20%. While cost savings are impressive, the quality metrics in our value-based care programs far surpassed the traditional fee-for-service quality measurements. One client’s orthopedic case study showed that patients under a value-based care program were significantly less likely to have a readmission or a complication. This is not an isolated example. Our clients consistently have higher quality outcomes and lower costs with their alternative payment programs due to incentivizing coordination of care.

Improving the American healthcare system is a challenging task that requires a deep understanding of the incentive framework perpetuating the status quo. Focusing solely on lowering healthcare costs, although seemingly a worthwhile goal, addresses only half of the problem. However, prioritizing quality healthcare outcomes addresses the core problems in the healthcare system and achieves lower costs as a positive consequence.


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