Can Cost Outcome Research Really Deliver Savings?

Given that the United States has the highest health care costs in the world relative to the size of our economy, it would be hard to argue against the utility of examining where and how our health care dollars are being spent. Finding ways to decrease the cost and burden of health care benefits both patients and the economy. It’s little surprise, then, that cost reduction was a major purpose of and selling point for the Obama administration’s recently past health reform legislation.

Unfortunately, many Americans equate scrutinizing health care costs with rationing health care, and the view was not improved by health reform opponents who alleged cost-cutting would amount to federal sponsorship of “death panels.” But the issue of cost is much more complex than simply deciding to charge less for health care services or denying access to treatment, and existed before health reform took place. Indeed, most health care providers recognize the importance of evaluating and lowering health care costs and are already working on ways to improve patient care in conjunction with reducing costs. Health reform simply added emphasis to an effort already underway.


This week’s post is the second in a new series on health care delivery by free-lance health care writer Jennifer Ecklund-Johnson. Ecklund-Johnson’s features will provide an in-depth analysis of the impact of health reform on various sectors of the health care provider community, including hospitals, specialists, and others. Look for additional posts in coming months.


“More than ever, consumers and payers are aware of the importance of maximizing the value of their health care dollar,” says Jeffrey G. Jarvik, M.D., M.P.H., director of the Comparative Effectiveness, Cost and Outcomes Research Center (CECORC) at the University of Washington. Dr. Jarvik says that the emphasis on health care costs existed even before the passage of health reform legislation and that patient outcomes are a big part of the equation. “There already is a great emphasis on cost, by the insurers and purchasers, although until now it’s been somewhat covert,” says Jarvik. “I believe that health reform will place a greater emphasis on quality and outcomes.”

This sentiment is echoed by others. “We are trying to prepare for a world where we get rewarded for providing better patient outcomes at lower cost; simply said, value-based purchasing,” said Bill Leaver, president/chief executive officer of Iowa Health System, which includes 25 hospitals that serve nearly 1 of every 3 patients in the state of Iowa and comprises the sixth largest nondenominational health system in America, including one of the country’s largest primary care networks. “The government and employers, who provide most of the commercial insurance for their employees, must find a way to reduce costs.”

As part of this intense focus on reducing costs, there has been an increased emphasis on what is called “cost outcome research,” particularly in the highly specialized areas of medicine. Cost outcome studies look at patient outcomes in order to establish that patients benefit from treatments and therefore whether it is worth the cost to refer patients for treatment. In other words, a cost outcome study can prove whether patients who receive a specific medical service or treatment have better outcomes than patients who do not receive it.

Cost outcome studies are not the same as “comparative effectiveness” studies, which are designed to compare the outcomes of various treatments for the same disease or condition. Though different, comparative effectiveness studies may also involve cost consideration because if two treatments have statistically similar outcomes but one treatment is significantly more expensive, the conclusion of a comparative effectiveness study would likely be that the preferred treatment is the cheaper one.

Until recently, cost outcome research has been almost unknown in some fields of medicine, even highly specialized ones. In neuropsychology, for example, there have been surprisingly few studies that have looked at outcomes of neuropsychological services systematically. One of the first to recognize the lack of cost outcome research in his field was Neil Pliskin, Ph.D., professor of clinical psychiatry and neurology, chief of the neurobehavior program, and director of neuropsychology at the University of Illinois at Chicago.

Dr. Pliskin co-edited a book on cost outcome research along with George Prigatano, Ph.D. for the National Academy of Neuropsychology. Published in 2004, the book is titled Clinical Neuropsychology and Cost Outcome Research: A Beginning. It is dedicated to “practicing clinical neuropsychologists, who are increasingly asked to justify the usefulness of their clinical work and to provide documentation regarding the cost effectiveness of their services and the impact those services have on health care economics.”

Pliskin said that they had to subtitle the book “a beginning” because there was so little relevant research at that time. “We struggled to even find a publisher because so little research had been done,” he said. “But that was the point—that we needed to do more research. Now in the wake of health reform suddenly it has become critically important. And I think that with health reform and the emphasis of integrating psychological care into primary care and preventative services, we have to be able to demonstrate that what we do makes a difference.”

Despite debates regarding the necessity and implications of cost outcome research, for some specialties it could actually prove a methodological lifeline, offering statistical validity for the value of their often very expensive services. Dr. Pliskin, for example, says that the simple fact that neuropsychologists continue to get referrals cannot be enough to demonstrate the value of neuropsychological services, a challenge that would be applicable to most specialties.

“We know from our work with patients’ family members, and our work with our referral sources, that what we do has an impact on the treatment of the individual patient,” says Pliskin. “So we could say that since the neurologists, neurosurgeons, and psychiatrists keep referring patients to us, they must be getting something out of it. But now it is coming to a shift where we have to demonstrate the impact of our services from a cost outcome standpoint—however that is measured—whether that is through decreased utilization or more focused utilization of services.”

For example, if patients experiencing cognitive changes associated with dementia receive neuropsychological evaluation early on in the disease, it is possible to protect them and accommodate them in a way that keeps them out of a nursing home and keeps them more independent for a longer period of time. This is not only a quality of life issue, but a cost issue as well, considering the enormous expense of nursing home care. “We know early neuropsychological testing benefits these patients.” says Dr. Pliskin. “Now we have to prove it.”

This example demonstrates how cost outcome research could actually be used to justify more care as opposed to a justification to deny a specific procedure or service as a form of “rationing.” If a specialist can prove empirically that a given treatment, although more expensive, will make a substantial difference in the patient’s outcome, they can provide a rationale for selecting the more expensive treatment. But cost savings can just as likely result, because if two treatment alternatives result in the same outcome, it will be clear that choosing the less expensive treatment is not a detriment to the patient.

Of course, the “holy grail” would be to prove in certain cases that referring a patient for expensive specialized care initially may end up reducing the overall cost of that patient’s health care, which multiplied many times over might achieve the hoped-for systemic cost savings envisioned by the proponents of health reform. Whether such savings can be achieved, however, is a question yet to be answered. Many more years of research will be needed to know if cost outcome research can have the desired effects and before providers know how it will affect today’s preferred health care treatments. The stakes are high for proponents of health reform as well as for clinicians.


Special Contributor Jennifer Ecklund-Johnson is a freelance health care writer. Her column for the Health Policy Forum focuses on the impact of health reform on health care delivery in the United States. “Special Contributors” are regular contributors to the Health Policy Forum who pose their own opinions and policy positions in the realm of health care and health policy. As a leading nonprofit health care research and consulting institute dedicated to improving human health, Altarum encourages open discussion and debate about the many challenges in health care today. All postings to the Health Policy Forum (whether from employees or those outside the Institute) represent the views of the individual authors and/or organizations and do not necessarily represent the position, interests, strategy, or opinions of Altarum Institute. Altarum is a nonprofit, nonpartisan organization. No posting should be considered an endorsement by Altarum of individual candidates, political parties, opinions, or policy positions.

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