Except for perhaps the very rich, the economic concept of “value” is something all consumers are familiar with, mostly because they practice it almost every day.  Value is simply the judgment each of us arrives at as we consider an item’s cost against its quality.  If the cost outstrips the quality, conscientious consumers tend to look elsewhere.

In health care, value works differently.  One big reason is that most of us are insured and therefore insulated from the actual cost of care.  But you would think those who do pay – the insurers, mostly – would care about value.  Well, for the most part, they don’t.

Start paying for value, not volume

Iowa hospitals want this to change, particularly in the Medicare program.  IHA has consistently and continually lobbied for “value-based purchasing,” which would require Medicare to rethink how it pays hospitals and physicians.  Essentially, it would move Medicare away from simply paying for volume and start paying for value.

Why is this important?  Because there is strong evidence that Medicare spends enormous sums of money on care that is simply wasted.

Research shows that more spending does not equal better care

As we’ve discussed before, the Dartmouth Atlas of Healthcare has shown, over decades of research, that some parts of the country spend much, much more on health care without getting any better results.  Even more evidence was released recently by the Agency for Healthcare Research and Quality (AHRQ), the federal agency whose mission is to improve the quality, safety, efficiency and effectiveness of health care for all Americans.

AHRQ released state-by-state health care quality data that looks at a broad list of quality measures:  type of care (preventive, acute and chronic care), setting of care (hospitals, ambulatory, nursing homes and home health care) and clinical area (cancer, diabetes, heart disease, maternal and child health, and respiratory disease).  Iowa happened to rank 11th in the nation based on a composite score based on these measures.

The AHRQ results become much more interesting when they are graphed along with the cost of care (in this case, Medicare’s annual spending per beneficiary) as a way of illustrating value.  As this graph shows, there are states that offer low value (poor quality at high cost) and those that offer high value (higher quality at relatively low cost), and that is where you find Iowa.

At least geographically, there is a clear pattern to these results; many of the states that fall into the high-quality/low-cost quadrant are in the Upper Midwest.  Some states with high costs would argue it’s more expensive for them to provide care.  That may be true to some extent, but it doesn’t explain why it costs so much more to care for essentially the same population of patients.

And looking more closely, it doesn’t explain why some expensive cities – like San Diego, Orlando and Seattle – have much lower costs than other similarly pricey cities – like Miami, Boston and Los Angeles.  And it certainly doesn’t explain why McAllen, a small city in Texas, spends far more than Houston, one of the largest cities in the country.

These disparities need to be understood and corrected

Beginning with the well-researched and documented information from Dartmouth, Medicare and other insurers need to find out why these disparities exist and what can be done to make more of the country more like Iowa.

Paying for the right care in the right place and at the right time would probably be a good place to start.