Improving Health Care Quality And Values - Harvard Kennedy School
May 2009Improving Health Care Quality and Values:Local Challenges and Local OpportunitiesBy Katherine Baicker (Harvard School of Public Health) and Amitabh Chandra (Harvard Kennedy School)At both the state and national level,sustainable, long-term health-carereform has three goals: extendinghealth insurance to the currentlyuninsured, improving the quality ofcare, and ensuring that costs reflect thevalue of the care that patients receive.The question is whether these goalsare both compatible and achievable.Policies that use local benchmarks toimprove quality and hold down costsmay be an effective and feasible wayto achieve these goals.Background:Coverage, Cost, and QualityExtending insurance coverage, asMassachusetts has done in the lastthree years, is no guarantee of highvalue care.1 An exclusive focus on theuninsured may be predicated on theidea that the insured are receiving highquality care, equating higher spendingand higher quality. Yet, the likelihoodof getting high quality care may havemore to do with geography thaninsurance status or spending.A substantial body of research – whichoriginates in large part from the workof John Wennberg and colleagues inthe Dartmouth Atlas of Health Care2– has shown large disparities in thequality and cost of care deliveredacross the U.S., even among peoplecovered by the same insuranceprogram (Medicare). Moreover, theresearch has found that places wherecare costs the most, such as greaterBoston, are not always the placeswhere patients receive the highestquality care. Rather, as Figure 1shows, there is a negative relationshipbetween Medicare spending and thequality of care received by Medicarebeneficiaries.3 It is not clear whatdrives this relationship, but the areaswith higher spending and lower qualityalso have a physician workforcecomprised of more specialists ratherthan generalists. It is also possible thatspecialization in high-tech “intensive”medicine may crowd out the deliveryof lower-tech medicine.These national statistics play out inthe Boston area as well. Figures 2aand 2b show the rising health carecosts of Medicare beneficiaries inBoston and surrounding areas. Costsfor Medicare beneficiaries in Bostonare high and rising, and, althoughspending levels are persistently higherthan in neighboring regions, most areexperiencing similar trends. Thereis evidence that Medicare and nonMedicare patients are treated similarlywithin hospitals.4 Like many highintensity utilization areas, hospitalsin Boston are providing life-savingRappaport Institute/Taubman CenterPolicy Briefs are short overviews of new andnotable research on key issues by scholarsaffiliated with the Institute and the Center.This brief is part of a longer forthcomingwork by Katherine Baicker and AmitabhChandra. Funding for this research wasprovided in part by the Rappaport Institutefor Greater Boston and the Taubman Centerfor State and Local Government.Katherine BaickerKatherine Baicker is a professor of healtheconomics at the Harvard School of PublicHealth.Amitabh ChandraAmitabh Chandra is a professor of publicpolicy at Harvard’s Kennedy School ofGovernment. 2009 by the President and Fellows ofHarvard College. The contents reflect theviews of the authors (who are responsiblefor the facts and accuracy of the researchherein) and do not represent the officialviews or policies of the Rappaport Instituteor the Taubman Center for State and LocalGovernment.Rappaport Institute for Greater BostonHarvard Kennedy School79 JFK Street, Cambridge, MA 02138Telephone: (617) 495-5091Email: rappaport u/rappaportA. Alfred Taubman Center for State andLocal GovernmentHarvard Kennedy School79 JFK Street, Cambridge, MA 02138Telephone: (617) 495-5140Email: mancenter
Improving Health Care Quality and ValueR appapor t Institute Taubman CenterPOLIC Y BRIEFSFigure 1: Medicare Spending and the Quality of CareSource: Baicker & Chandra, Health Affairs, 2004therapies to patients from a wide geographicarea, but it is not obvious that incremental careprovided generates substantial gains in qualityor length of life that are commensurate with theadditional costs of such care.The wedge between spending and value hasimportant implications for both public andprivate insurance. Increasing spending onhealth care is placing a growing strain on thefederal and state budgets that finance Medicareand Medicaid. The increasing costs of privateinsurance, which is largely purchased throughemployers, erodes the wage increases thatworkers might otherwise see and, especiallyfor low-wage workers, puts jobs in jeopardyand could thus drive even higher rates ofuninsurance.5 The goals of increasing valueand increasing coverage are thus intertwined,and improving the value delivered through thehealth care system could have wide-rangingbenefits.The substantial variation in local practicepatterns presents both challenges andopportunities. Quality and value improvementsin some hospitals may have spillover effectsto neighboring hospitals if physicians andhospital staffs learn best practices from eachother. Improving the performance of hospitalsthat lag behind their local peers could go a longway towards improving health care deliveryand reducing disparities. The focus on localpeers may also be more practical and politicallypalatable than a strategy of implementingnational benchmarks where hospitals in an areamay be asked to perform at a higher level thanany other provider in the area.Measuring Quality and CostTo estimate potential gains, we follow previousresearch and construct measures of quality ofcare and end-of-life spending that also take intoaccount potentially large differences in the mixof patients seen at particular hospitals.2
Improving Health Care Quality and ValueR appapor t Institute Taubman CenterPOLIC Y BRIEFSFigure 2a: Part A Medicare Reimbursements in Boston and Nearby Regions, 1992 - 2006Figure 2b: Part B Medicare Reimbursements in Boston and Nearby Regions, 1992 - 20063
Improving Health Care Quality and ValueMeasuring Quality:To measure quality, weused data from the Hospital Quality Alliance(HQA), a public-private collaborationbetween the Centers for Medicare andMedicaid Services (CMS) and several hospitalorganizations, that publicly reports hospitalperformance on select process-of-caremeasures through an online website.6 Thesemeasures focus on three major conditions forwhich evidence-based treatments are supportedby a solid body of evidence: Acute MyocardialInfarction (AMI, or heart attack), pneumonia,and Congestive Heart Failure (CHF). Wepooled data from 2005-2007, and used onlythe measures for which a majority of hospitalsreported at least 25 observations.7 We thencreated a measure of the quality of care: thenumber of times a hospital performed theappropriate action across all measures for thatcondition by the number of “opportunities” thehospital had to provide appropriate care foreach hospital.Measuring Low-Value Spending: To measurespending that is likely to be of low valueto patients we used spending on Medicarebeneficiaries in the last two years of life.As The Dartmouth Atlas of Health Care hasshown, this measure is not correlated withthe delivery of health care whose efficacyis determined by well-articulated medicaltheory, much less by scientific evidence. Forexample, higher utilization of end-of-lifecare is associated with multiple specialistvisits, shorter revisit intervals, and the use ofimaging and diagnostic technologies. Eachof these services is clearly therapeutic forsome patients, but clinical trials and medicaltextbooks offer little guidance to the “rightrate” for these technologies. Moreover, byfocusing on variation in the treatment ofpatients with identical life expectancy, the endof life (EOL) spending measure better reflectsthe portion of spending that is attributableR appapor t Institute Taubman CenterPOLIC Y BRIEFSto differences in the ways similar patientsare treated. Spending data were adjusted fordifferences in age, sex, race, and the relativefrequency of chronic illness among thebeneficiaries studied.Defining Geographic Areas: To compare eachhospital’s performance to local benchmarks,we used the Dartmouth Atlas’s 306 HospitalReferral Regions (HRRs). We linked thesedata with the American Hospital AssociationAnnual Survey database, which has informationon hospitals’ staffing, capacity and patientpool characteristics. In particular, we usedinformation on the racial composition of eachhospital’s patient population to estimate effectsof quality improvement on racial disparities.National and Local Variation in Quality andCostOverall, most patients receive high-qualitycare. The average score for the quality ofcare is 87.9 percent (meaning that in 87.9percent of the instances, appropriate caresuch as aspirin at admission for heart attack isin fact administered). However, hospitals inthe bottom quartile provide this appropriatecare 85.8 percent of the time, and only 77.3percent of the time for heart failure patients. Bycontrast, hospitals in the top quartile deliveredappropriate care 92.5 percent of the timeoverall, and 90.0 percent of the time for heartfailure patients. As important, 68 percent ofthe variation in overall quality occurs withinHospital Referral Regions (HRRs), with only32 percent driven by differences between thoseregions. This means that there is much morevariation in quality among the hospitals withina given area, such as greater Boston, thanthere is variation between the average qualityprovided at Boston-area hospitals and theaverage quality provided in other regions.4
Improving Health Care Quality and ValueAverage spending for Medicare beneficiaries(expressed in 2005 dollars) in the last twoyears of life is similarly variable. The nationalaverage was 35,278 – while the differencebetween the highest cost quartile and thelowest cost quartile was 12,000. Unlikequality, however, there is much less variationwithin HRRs in the cost of EOL care thanthere is between HRRs: only 23 percent ofthe variation in EOL spending is attributableto differences in costs at hospitals in the samearea such as greater Boston, with the majorityattributable to differences in the average costin greater Boston compared to the average inother HRRs.Learning from Neighbors: The fact thathospitals in a local area tend to provide asimilar style of care introduces the opportunityfor leveraging investments in quality andvalue. We used these data to see if an increasein quality in one hospital has a “spillover”effect to neighboring hospitals. Can providers“learn” from others’ experiences? (While wecharacterize this as “learning,” the mechanismsthrough which these spillovers might occurhave not been conclusively established.)Table 1 shows that even controlling for howwell each hospital performed on qualitymeasures last year, an increase in the qualityof neighboring hospitals was associated with aquality improvement of 0.2 percentage points.Similarly, if neighboring hospitals spent 1,000more on EOL care, a hospital was likely tohave EOL spending that was 170 higher. Thisspillover effect suggests that investments thatdrive improvements in quality and value in onehospital may reap broader rewards. They alsosuggest a strategy for improving performanceand reducing disparities in a way that maybe more logistically and politically feasiblethan trying to impose national performancestandards.R appapor t Institute Taubman CenterPOLIC Y BRIEFSTable 1: Spillovers from Neighboring HospitalsQualityEOLHospital’s Own Quality orSpending Last Year0.68(0.02)0.76(0.02)Quality or Spending inNeighboring Hospitals0.21(0.03)0.17(0.01)Source: Baicker and Chandra, NBER AgglomerationsVolume, Forthcoming. Additional controls includehospital and patient pool characteristics.Using Local Benchmarks to Achieve LargerGoalsGiven that the quality and cost of care alsovaries greatly within each region, a promisingapproach may be to focus on the cost savingand quality improvement that could beachieved if lower-performing hospitals andtheir medical staffs approached only the levelof value achieved by the better performersin their own local area. This strategy wouldproduce a substantial share of the potentialgains from using national benchmarks and alsoerase substantial share of the well-documenteddisparities in the quality of care received byblack and white patients.If all hospitals currently scoring below the 25thpercentile of overall quality score nationallywere brought up to that threshold, the overallquality score would improve from 87.9 to 89.8,as shown in Table 2. Total per-patient EOLspending for the highest-spending quartile ofhospitals is 39,216. If all hospitals spendingmore than that were to reduce their spending tothat level, national average EOL spending forMedicare beneficiaries would be reduced from 35,278 to 31,198.Achieving national-level (or even statelevel) benchmarks may be quite difficult,however. For example, hospitals in western5
R appapor t Institute Taubman CenterImproving Health Care Quality and ValuePOLIC Y BRIEFSTable 2: Gains from Raising PerformanceAverage ValueSetting National StandardsBringing upBottom 10%Overall Quality87.9Reduction inDisparityEnd-of-lifeSpending 35,278Bringing upBottom 25%Setting Local StandardsBringing upBottom 10%Bringing upBottom 25%89.189.888.989.532%52%12%28% 33,358 31,198 34,946 34,249Source: Baicker and Chandra, preliminary analysis from work in progress.Massachusetts may not see the hospitals indowntown Boston as their peers, let alonehospitals in Los Angeles. Not only do theyserve very different populations, but thephysician staffs likely have quite limitedinteractions and have different resources attheir disposal.Because the majority of variation in qualityoccurs within HRRs, bringing lagging hospitalsup to the performance level of other hospitalsin their region would capture most of thegains of setting a national benchmark. Overallquality would improve from the currentaverage of 87.9 to 89.5 rather than the 89.8 fornational benchmarks.In contrast, as noted above, the variation inEOL spending is much greater between HRRsthan it is within HRRs. Consequently, bringingdown the spending of the highest-spendinghospitals within an area to the level of theirlower-spending peers would not do much toreduce aggregate EOL spending, with levelsdropping only from 35,278 to 34,249,compared to 31,198 for national benchmarks.Figure 3a and 3b show these results graphicallyfor hospitals in greater Boston. The top panelshows the distribution of quality for heartattack patients, while the bottom panel showsinpatient EOL spending. The vertical linesshow local and national benchmarks. From thiswe see that Boston quality is above the nationalaverage, but it also spends more on EOL careof questionable value.Effects on DisparitiesBecause many of the well-documenteddisparities in treatment based on race are dueto the fact that minority patients systematicallyare treated at lower-quality hospitals,8benchmarks can also greatly reduce racialdisparities in health care. Table 2 also showsthe current between-hospital quality disparitybetween white and black patients. The averagebetween-hospital difference in overall qualityscore (calculated based on the racial mix ofeach hospital’s patient pool and the quality ofcare delivered at that hospital, not individualtreatment) is 2.5. That disparity would dropto 1.2 if the bottom 25 percent of hospitalsnationally were elevated to the 25th percentilescore for overall quality – eliminating 52percent of the quality gap. On the other hand,6
Improving Health Care Quality and ValueR appapor t Institute Taubman CenterPOLIC Y BRIEFSFigure 3a: Quality of Care for Heart Attack Patients at Boston-area HospitalsSolid lines represent the 10th and 25th percentiles within the geographical area, and dashed lines represent thecorresponding national percentile.Figure 3b: Cost of End-of-Life Care at Boston-area HospitalsSolid lines represent the 75th and 90th percentiles within the geographical area, and dashed lines represent thecorresponding national percentile.Source: Baicker and Chandra, preliminary analysis from work in progress.7
R appapor t Institute Taubman CenterImproving Health Care Quality and Valueif the bottom 25 percent of hospitals in eachHRR were elevated to the local benchmark,the disparity would drop from 2.5 to 1.8 –eliminating 28 percent of the gap, or a littlemore than half of the reduction achievablethrough attaining the national benchmark.For the heart failure subcomponent of quality,virtually all of the gain is achievable throughlocal benchmark performance.ConclusionBringing quality up and costs down in hospitalswhose performance lags has emerged as a keycomponent of long-term health-care reform.Achieving this goal on a national scale,however, may by stymied by both logisticaland political resistance. Looking instead toimprove hospital performance to the levelsachieved by their better-performing peerswithin their own local area – rather than askingthem to attain national benchmarks that mayseem quite removed from local resources,practice styles, and capabilities – may be amore viable alternative, particularly becausethere is suggestive evidence that hospitals areable to “learn” practices from other nearbyhospitals.Using measures of quality and low-valuespending that are relatively robust todifferences in patient mix and illness burden,we show that achieving local benchmarkperformance would raise quality by almostas much as achieving national benchmarks.Achieving local quality benchmarks wouldalso go a long way in reducing the disparitiesin the quality of care received by black andwhite patients. However, local benchmarkswould not go as far in reducing low-valuespending. These results suggest that policiesthat focus on local benchmarks, which maybe most feasible, may not sacrifice much interms of quality improvements, making theman attractive option for setting goals in futurehealth reforms.POLIC Y BRIEFSOf course, establishing the value of localgoal-setting does not tell us the best way toachieve those local goals. Reducing spendingon low-value care while improving the overallquality of care delivered is likely to require thedeployment of many policy levers, includingprovider payment and insurance system reform.While these reforms are likely to be politicallyand practically difficult to achieve, settingeffective metrics by which to gauge successmay help smooth the path.Endnotes1See Katherine Baicker and Amitabh Chandra,“Myths and Misconceptions About HealthInsurance,” Health Affairs, Vol. 27, no. 6,w533-w543, October 21, 2008.2John Wennberg and Megan Cooper, TheDartmouth Atlas of Health Care (Chicago:American Hospital Association Press, 1999).3See Katherine Baicker and Amitabh Chandra,“Medicare Spending, the Physician Workforce, andBeneficiaries’ Quality of Care,” Health Affairs SupplWeb Exclusive (2004): w184-197 (published online187 April 2004; 2010.1377/hlthaff.w2004.2184).Amitabh Chandra and Douglas O. Staiger.“Productivity Spillovers in Health Care: Evidencefrom the Treatment of Heart Attacks.” Journal ofPolitical Economy Vol.115, no. 1 (February 2007):103-140. Katherine Baicker, Amitabh Chandra,Jonathan S. Skinner and John E. Wennberg, “WhoYou Are and Where You Live: How Race andGeography Affect the Treatment of MedicareBeneficiaries,” Health Affairs, Web Exclusive(2004): 33-44.4See Laurence Baker, Elliot Fisher, and JohnWennberg, “Variations in Hospital Resource Usefor Medicare and Privately Insured Populations inCalifornia,” Health Affairs, Web Exclusive (2008),12 Feb, hltaff.27.2.w123.5See Katherine Baicker and Helen Levy, “EmployerHealth Insurance Mandates and the Risk ofUnemployment,” Risk Management and InsuranceReview Vol. 11, no. 1 (2008): 109-132; KatherineBaicker and Amitabh Chandra, “The Labor MarketEffects of Rising Health Insurance Premiums,”Journal of Labor Economics Vol. 24, no. 3 (2006);Cutler, David, and Brigitte Madrian. “Labor MarketResponses to Rising Health Insurance Costs:Evidence on Hours Worked,” RAND Journal ofEconomics, Vol. 29, No. 3 (Autumn, 1998), 5098
Improving Health Care Quality and ValueR appapor t Institute Taubman CenterPOLIC Y BRIEFS530.6For details see Ashish K. Jha, Zhonghe Li, E.John Orav and Arnold M. Epstein, “Care in U.S.Hospitals--the Hospital Quality Alliance Program,”New England Journal of Medicine Vol. 353, no. 3(2005): 265-274.7For AMI patients, the treatments are: aspirinat arrival, aspirin at discharge, beta-blockerprescription at arrival, beta-blocker prescription atdischarge. For CHF patients, the treatments are:assessment of left ventricular function, provisionof discharge instruction, and ACE-inhibitor orARB prescription for patients with left ventricularsystolic dysfunction (LVSD). For pneumoniapatients, the treatments are: blood culture performedbefore receiving the first antibiotic in the hospital,first dose of antibiotics within four hours ofadmission, initial antibiotic selected appropriately,and assessment of arterial oxygenation within 24hours of arrival.8See, for example Amitabh Chandra and JonathanS. Skinner, “Geography and Health Disparities,”In Critical Perspectives on Racial and EthnicDifferences in Health in Late Life, edited byNorman B. Anderson, Rodolfo Bulatao and BarneyCohen. Washington D.C.: National ResearchCouncil of the National Academies, 2004 andAmber E. Barnato, F. Lee Lucas, Douglas O.Staiger, John E. Wennberg and Amitabh Chandra,“Hospital-Level Racial Disparities in AcuteMyocardial Infarction Treatment and Outcomes,”Medical Care Vol. 43, no. 4 (2005): 308-319.9
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Improving Health Care Quality and Value The substantial variation in local practice patterns presents both challenges and opportunities. Quality and value improvements in some hospitals may have spillover effects to neighboring hospitals if physicians and hospital staffs learn best practices from each other. Improving the performance of hospitals
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