Healthcare usage and pricing drive variation between states' total healthcare costs, according to a new report by the Network for Regional Healthcare Improvement (NRHI).
The report, Data is the Spark, Collaboration is the Fuel, found wide variations in costs between five states: Colorado, Maryland, Minnesota, Oregon and Utah — along with St. Louis, Missouri.
NRHI discovered that Colorado and Minnesota's healthcare costs were well above the average, while Maryland was well below.
Policymakers, payers, providers, pharmacy benefit managers and countless other healthcare participants are looking at ways to bend the cost curve without restricting access or putting too many costs onto one specific stakeholder, especially the patient.
Many have created programs seeking to contain costs. Those efforts have been largely successful in reducing utilization in higher-cost locations, such as emergency rooms and in-hospital imaging centers.
In the report, NRHI said price and care delivery differences contribute to the differences. NRHI also found that pharmacy pricing was consistent across the areas. That's likely because of national pricing policies and only a few large pharmacy benefit managers that dominate the market.
The report, which received support from the Robert Wood Johnson Foundation, shows some regions are doing better than others.
Maryland had the lowest costs of the six regions with a total cost index 20% below the benchmark. On the other end, Colorado was 19% above the benchmark and Minnesota was 11% above the benchmark. The only metro area in the study, St. Louis, was 6% below the benchmark.
Colorado's average utilization dipped in all service categories in 2016 compared to the previous year. However, prices were higher than the benchmark, including 15% increases in inpatient and 11% jump in outpatient. NRHI suggested that Colorado could save more than $54 million annually if it brought costs down to the statewide median and more than $141 million if it reined in costs to the multi-state average.
"Many efforts are underway in Colorado to curb healthcare costs, and this new data shows that we need to accelerate those efforts in certain areas in order to make healthcare affordable for Coloradans," said Denver-based Center for Improving Value in Health Care president and CEO Ana English.
The report is the latest research that showed wide variations between areas. A recent report from the Health Care Cost Institute of 112 metro areas found Anchorage, Alaska, and San Jose, California, had rates 65% above the national average in 2016. The large variations were connected to the price differences and growth of certain service categories, such as inpatient, outpatient and professional services, according to that report.
Hospitals have limited influence over healthcare costs but are trying to bend the cost curve. A recent Kaufman Hall survey reported that nearly 60% of hospital executives said they have systems and processes in place to make leaders accountable for meeting cost goals. However, fewer than 20% of leaders said they've seen cost reductions more than 5% in any priority area this year.