Seven elements of low cost health care

Grand Junction, Colorado is touted as a low cost, high performance health care market. A New England Journal of Medicine Perspective (Low-Cost Lessons from Grand Junction, Colorado) provides seven reasons for this success:

  1. Leadership by the primary care community
  2. Financial risk sharing by physicians
  3. Equalization of physician payment for the care of Medicare, Medicaid, and privately insured patients
  4. Regionalization of services into an orderly system of primary, secondary, and tertiary care
  5. Limits on the supply of expensive resources, including specialists, beds, and equipment
  6. Payment of primary care physicians for hospital visits
  7. Robust end-of-life care

This is a good list, and the US health care system as a whole would benefit if it shifted in this direction. Items 2 through 6 flow pretty naturally from putting primary care in charge.

One of the more interesting items to me is number three. In most places fee levels vary greatly for Medicare, Medicaid and commercial patients, and there can be big variations even within the commercial population. That leads to distortions as providers try to make up for low reimbursement from some programs (e.g., Medicaid) by insisting on higher fees from the commercial carriers. These costs are passed on to employers and the individual insurance market, creating hidden subsidies and cost shifting. It’s much better when there is just one market price and a provider’s financial performance is a function of their efficiency and effectiveness rather than patient mix. It’s not sufficient by itself to solve everything, but when coupled with other factors described here it can make a major difference.

October 6, 2010

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