Does higher quality care mean higher costs?

It’s a worthy goal: Reducing healthcare spending while improving quality. But it’s tough going. An article and editorial in the January 2013 issue of the Annals of Internal Medicine served as a reminder of that fact…as if anybody who works in healthcare needed reminding.

Researchers reviewed published studies to attempt to answer this question: Does improved quality of patient care necessitate increased spending, or can higher quality actually lead to lower spending because of reduced complications or hospital readmissions? Unfortunately, they found only that the association between healthcare quality and cost is little understood.
After reviewing the literature, the researchers found that 21 studies reported a positive association between higher costs and higher quality (meaning that higher quality and higher costs go together); 18 reported a negative or mixed-negative association (higher quality was associated with lower costs); and 22 studies reported either no difference, an indeterminate association, or mixed association between the two.

Today’s healthcare providers are faced with the challenge of reducing waste (that is, overtreatment or ineffective treatment) without scrimping on needed care. This research points to one big reason why they are having such a tough time doing that: We still don’t know enough about the correlation between quality and cost.

But there are other issues, including some to which contracting executives might be closer. According to the editors of the Annals, “Even where physicians are able to estimate the degree to which a recommended treatment or diagnostic intervention may clinically benefit their patients, they know notoriously little about the cost or cost-effectiveness of their recommendations to their patients or the health system in which they work.

“Furthermore, what may benefit an individual or society may be at odds with what may be advantageous for the providing organization, so physicians must negotiate the complexities of the existing payment system. In summary, even if physicians wanted to respond to incentives to reduce waste, they probably lack the essential information, tools, and infrastructure to do so.

“Ultimately, the success of payment reforms that shift financial accountability for health care spending to providers requires that all parties have better information on the value of medical care inputs and systems so that they can effectively deploy scarce resources,” conclude the editors. “Physicians need it to set priorities, provider organizations need it to build supporting infrastructure, and payers need it to monitor the outcomes of contracting and adjust incentive arrangements.”

Contracting executives have plenty of opportunities to be more than interested bystanders during discussions of cost and quality. Many of you already play an important role in your facility’s value analysis efforts. And many of you are taking great pains to educate clinicians on the cost of the tools, equipment and supplies they use to provide care.

Journal of Healthcare Contracting readers can, and should be, part of the dialogue, and part of the solution.

About the Author

Mark Thill
Mark Thill is the Editor of The Journal of Healthcare Contracting and has been reporting on healthcare supply chain issues since 1985. He is a graduate of Dominican University in River Forest, Ill., and he received a master's degree in journalism from Northwestern University in Evanston, Ill.