This issue brief from the Network for Regional Healthcare Improvement highlights how measurement of the total cost of care is a prerequisite for health care cost reductions. Total cost of care is defined as the cost to the purchaser of care – the individual or organization paying for health care services – not the cost to a provider to deliver the care. There are two primary components to measuring the cost of care: measuring service-specific utilization and service-specific price information. Measured separately, each of these components has significant limitations, but measured together, they create a powerful way to understand what is driving purchasers’ health care costs and how to reduce them or slow their growth.

The issue brief describes why most current methods of measuring cost of care are insufficient, and presents five core components for measuring, analyzing, and reporting the total cost of care, as well as the challenges associated with such measurement.

  1. Obtaining and assembling the data from multiple data suppliers;
  2. Defining the measures;
  3. Analyzing the data;
  4. Publicly reporting the results; and
  5. Taking action on the findings.

Efforts to generate measures and analyses to better understand total cost of care require all stakeholders – purchasers, payers/plans, and providers–to work in tandem. Collaboratives can combine health care claims data from multiple payers to generate measures of quality and utilization. They have existing processes in place to build consensus among providers and payers as to how measures should be defined and used; they have processes in place to enable providers to review and ensure the accuracy of measures before they are publicly reported; and they have programs to help providers redesign the way they deliver care to improve performance on the quality and utilization measures.

The issue brief provides some examples of early efforts in communities to develop and use total cost of care measures, what they are learning, and the challenges they are facing. The issue brief was funded by the Robert Wood Johnson Foundation.

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