By Fred Jarrett and Steve Mullin
About 20 years ago, Ron Sims, then the King County Executive, realized healthcare costs constituted a significant and uncontrolled part of the county’s employee expenses. He figured the same held true for other employers, both public and private. He reached out and, working together, King County, Boeing, and others created a collaborative alliance focused on improving healthcare by focusing on value and measuring quality, patient experience, and cost of care.
The resultant Washington Health Alliance (Alliance) garners national esteem for its ability to get four critical groups to set aside their differences and thus improve healthcare across Washington state. The four groups in the alliance:
- providers, the people, and institutions who deliver healthcare to consumers
- payers, the insurance companies and others who serve as intermediaries between consumers and those who provide healthcare services
- purchasers, the employers, unions, and individuals who purchase insurance and healthcare services
- consumers, the individuals who receive healthcare services and, ultimately, pay the bills.
Any of us who’ve tried to understand a hospital bill knows how convoluted it can be. First, bills tend to be for the individual costs – the exams, rooms, professional services, and medication, etc. – not for the total cost of, for example, a knee replacement. Second, there tends to be an opaqueness about the costs. There may be a list price, different prices negotiated by different payers, another price for Medicare- or Medicaid-funded services, and an altogether different price for those without insurance. None of these is transparently visible, since prices are not posted as they are in the grocery store.
For the Alliance, untangling quality and price transparency have been its top priorities. That requires collecting data and reporting on the performance of the region’s and the state’s healthcare systems. Initially focused on quality and patient experience, the Alliance’s reporting has evolved to include episodes of care, statewide spending, and reporting on the entirety of care provided in addition to individual services.
Collaboration makes all of this possible. The Alliance built a structure of committees to select the measures and support data collection. Next, bringing the players together to understand the results and issue PUBLIC reports. Collaboration adds a critical ingredient: credibility.
From these reports, the Alliance’s members and the public can see the performance of various providers around the state and how that performance varies. The data validate good performance and encourages improvement where needed. That also spurs conversations between purchasers, payers, and providers.
But up to now, reporting hasn’t helped depict variations between populations and regions, and the differences in the cost of healthcare services available to these groups. To do this, the Alliance now adds reporting on the Total Cost of Care across the state’s counties and Accountable Communities of Health (ACHs). This reporting looks at the population of the state and asks, “How much does healthcare cost (actually cost, really) per person in a particular county?” and “How are the populations different in terms of disease burden?” You can see the answer to both questions in the map below.
The top number represents how much services received by individuals with commercial insurance cost in 2020 on a per member per month (PMPM) basis for each county. In other words, all the payments made by insurers under the coverage sold to companies and individuals, as well as the costs shouldered by consumers. The colors indicate the differences from the state average, with shades of green being below average and red above.
The second, lower number represents the disease burden for the county. Using risk adjustment, the statewide average is set at 1.0; higher than that indicates a greater disease burden, lower is less. This enables richer and more equitable comparisons about health challenges between populations.
For example, notice the difference between Skamania and Klickitat counties. They border each other and have lower than average disease burdens, yet Skamania’s PMPM is below the state average and Klickitat’s above.
The Total Cost of Care online tool allows one to dig into the data using side-by-side comparisons of the counties. Comparing Skamania’s 10% lower cost than Klickitat’s, we see Skamania lower in all but one category: professional services cost 6% more, while all other services run 20% to 150% less. Not the answer, but a focus for conversation, comparisons, and learning.
Another view of the data provides insights into the cost of providing different types of care. The chart below shows the highest-cost counties for emergency-related services are Ferry, San Juan, and Jefferson.
Looking at the high ambulance costs in Ferry and San Juan, one naturally wonders if being an island county affects costs. You can be sure the conversation has started on this and on other disparities across the state and regional populations.
The tool will also support analysis of the relationship between quality, cost, and county. Data analysis currently underway will show relative costs and quality across the state. We expect the Alliance to release the analysis in the coming weeks, presumably showing which counties have high quality and low cost, and vice versa.
The importance of this information can’t be understated. For too long, it’s been held murkily in silos within the industry. Now, with the Total Cost of Care report, this data is coming out in the sunshine where questions can be asked, conversations started, and improvements in the cost and equity of our healthcare system can continue.
Washington state’s fortunate to have a robust, data-driven collaboration working to improve and make more accountable our healthcare system. Now we can “do the numbers.”
Steve Mullin is President of the Washington Roundtable, a public policy research and advocacy group composed of senior executives from major private sector employers in Washington state in support of education and economic development.