New study shows Colorado’s health care costs are 17 percent higher than other states

by Center for Improving Value in Health Care

A recent multi-state study shows Colorado could save more than $48 million annually across 102 adult primary care practices if prices for health care services were closer to the average across Colorado’s participating practices. Results found that Colorado’s total costs across all health care services were 17 percent higher than other states, and substantially higher with respect to outpatient services (30 percent higher). Colorado’s overall high costs were driven by both higher use of health care services and higher prices for those services when compared to other states.

As health care costs continue to rise in Colorado and across the nation, it’s essential to better understand what’s driving those increases in order to make positive changes. There are a number of reasons why costs may vary both within one state and among several, including the health of the population, how often people see a health care provider or fill prescriptions (also known as utilization), and the prices of those services. The Total Cost of Care project, funded by the Robert Wood Johnson Foundation and led by the Network for Regional Healthcare Improvement, is the first of its kind to measure those factors in a standardized way across multiple states.

Center for Improving Value in Health Care (CIVHC) participated in the study on behalf of Colorado using claims data from the Colorado All Payer Claims Database (CO APCD). Colorado’s data included information from 14 commercial payers for patients attributed to 102 adult primary care practices, and 24 pediatric practices. Across the participating states – Colorado, Oregon, Utah, Minnesota and Maryland – results of the national report show that the ways people access health care and the associated pricetag differ significantly, resulting in very different per-patient total costs from state to state.

In Colorado, across all categories of services analyzed (hospital inpatient, outpatient, professional and pharmacy), higher total costs were driven more by patients using health services more frequently than the price of those services compared to other states, although both were a factor.

“Providers and other stakeholders are well aware that health care costs are high in our state, and that costs – especially premiums – can vary greatly depending on where you live,” explained Ana English, CIVHC president and CEO. “Until now, we haven’t had much insight into what’s driving that variation – people using a lot of services, high prices for care, or both. This analysis helps us begin to understand causes of local variation and enables providers to understand patient patterns outside their practice to help them make informed care decisions.”

Of the four service categories analyzed, Colorado’s costs were higher than any other state for three out of the four: outpatient (30 percent higher), inpatient (16 percent higher) and pharmacy (24 percent higher). Professional services was the only category where Colorado fared better than other states, although total costs were still higher than two participating states. Higher costs in outpatient and pharmacy services appear to be driven mostly by higher utilization whereas inpatient costs are driven almost solely by above average prices.

To address relatively high costs in Colorado, it is important to understand which areas of the state have the biggest opportunities for change. Within Colorado, total costs varied substantially by Colorado Division of Insurance (DOI) geographic rating area and ranged from $390-$591 per member per month (PMPM) across the 102 adult primary care practices analyzed.

Six regions in Colorado had higher PMPM total costs than the statewide average. The East and Greeley regions had the two highest risk-adjusted PMPM costs in the state, driven by both higher utilization and higher prices. Grand Junction and the West regions had the third and fourth highest total costs respectively, primarily driven by higher prices, as utilization in those areas is either lower than or nearly equal to the statewide average.

Colorado’s outpatient category total cost, which exceeded the five-state average by the largest amount at 30 percent above the multi-state benchmark, showed variation across Colorado DOI regions between $87-$208 PMPM. All regions except for Boulder, Denver and Colorado Springs were above the statewide median ($104 PMPM). Greeley, West, East and Grand Junction regions were top four for highest outpatient costs, driven by both higher than average utilization and higher than average prices in those areas.

As part of this project, CIVHC also provided detailed practice-level reports to the 102 adult primary care physician practices and 24 pediatric practices included in the Colorado analysis.

“Although primary care providers cannot always directly address what’s happening with patients beyond their walls and across all service categories, the information can help them understand patient care patterns and identify specific opportunities to reduce total costs,” said Jonathan Mathieu, vice president of research and compliance for CIVHC. “The data we provided specific to practices can help them be successful under new payment models that reward value over volume. This information allows practices to see how their cost and utilization performance compares to that of their peers, helps them make better informed decisions regarding patient referrals, and assists in designing targeted patient education programs.”

According to the CIVHC analysis, only 32 percent of the adult primary care practices in the study fell into the low cost and low utilization category, leaving 68 percent of practices with opportunities for cost saving improvements in price, service use, or both.

In order for this information to be actionable to providers, it has to indicate both high-level and specific areas of opportunity to reduce total costs. For example, data provided to one practice showed that their total Professional costs were 23 percent higher than average, driven by 26 percent higher utilization. Total costs for outpatient services at this practice were 7 percent lower than average, despite 55 percent higher utilization because prices for those services were 40 percent below average. The practice can also see that their patients are less healthy with a 35 percent higher “risk score” compared to the state average.

Further detail shows that patients receiving MRIs at this practice experienced 63 percent higher total costs than average, also driven by higher utilization and price. Equipped with this data, this practice could consider evaluating where patients are going for MRI services to ensure that they are referring patients to the highest value (low price and high quality) providers possible.

In the coming year, CIVHC will add nationally endorsed quality measures to the practice-level reports, enabling a variety of stakeholders to evaluate performance on both total cost and quality of care, and will evaluate the potential to expand reporting to more practices. CIVHC also plans to work with providers to make summary cost and utilization information contained in the practice-level reports available publicly at www.civhc.org.

An important first step toward practice-level quality reporting is the quality measures interactive report on CIVHC’s website. Also available are interactive cost of care reports, utilization reports and chronic condition reports that show trends and opportunities across Colorado for the Medicaid, Medicare Advantage and Commercially-insured populations.

If you have questions or would like to provide input on the next phase of this project, please contact us at info@civhc.org.


Categories: Communications, Colorado Medicine, Resources, Health System Reform