Traditionally, many employers have responded to rising healthcare costs by increasing member contributions and cost-sharing or turning to utilization controls such as prior authorization or medical certification to manage spending. These approaches can produce short-term savings, but they do little to address a fundamental driver of cost: the variation in quality and cost delivered by different providers.
One of the most significant (and often overlooked) contributors to healthcare spend is variation in provider quality. Employers and health plans are aware of variation in negotiated rates, and substantial effort goes into managing cost through contracting and network strategy. But price is only part of the equation. Two physicians in the same network can treat the same condition at dramatically different costs, not only because of negotiated rates, but because of how they practice medicine. Differences in clinical decision-making, procedure and medication utilization rates, complication rates, adherence to evidence-based guidelines and patterns of follow-up care can change the overall cost drastically. In other words, even after rates are negotiated, the way care is delivered once a provider is selected often determines whether costs compound or remain controlled.
