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Cost Variation For A Diagnostic Test In Healthcare Industry Affecting Reimbursement

The health care costs in the USA are exceeding considerably by 17% of GDP. Whereas expenditure done by other countries are less but with the same time healthcare cost is in increasing trend. As the population ages, the advanced treatments follow and contribute togetherly in increasing the trend of healthcare costs. Also, the insurance companies and government reimburse for the number of procedures in the treatment done rather than the results of the procedures and patients bear little responsibility for the cost of the health care services they demand.

Actually, it is not clear about how much it costs to deliver patient care, much less how those costs compare with the outcomes achieved. Rather than focusing on the costs of treatment of individual patients with different medical conditions over their full cycle of care, providers aggregate and analyze costs at the specialty or service department level.

There was significant variation for costs of diagnostic tests depending on provider and facility available, which ranged from three-fold to 20-fold. It is possible for the healthcare industry to cut these costs if they decide to cut the baseline cost of the most expensive procedures.

The UnitedHealth Group of researchers proposed a reduction of costs of the most expensive tests down to those tests priced at the 40th percentile. Tests rating in the top 60 percent of encounters would be adjusted to be less expensive, but those in the lower 40 percent of encounters would remain the same. Eventually, these adjustments shall result in $18 billion in annual cost savings. Shortly, the total spending for the most common diagnostic tests would go down from $37.4 billion annually to $18.9 billion.

These practice variations can be observed in the case of most diseases. Exceptionally where treatment is unavoidable, where the treatment choice is clear and where differences in provider judgment are not considered, such as in hospital admission rates for hip fractures. However, these scenarios account for only about 15 percent of the provided care. To identify which measures can help best to reap this potential, the payer needs to understand properly the importance of practice variation firstly.

Substantial regional practice variation indicates overuse, underuse, or misuse of medical services. Patients who are over or undertreated may experience suboptimal outcomes. Overtreatment unnecessarily exposes them to the risk of complications and increases health care costs. Whereas under treatment may cause unnecessary suffering and may lead to very high health-care costs down the road if the patient’s condition progresses and hospital admission and acute care are required.

Healthcare payers, public and private, can put light on unwarranted practice variation by analyzing and leveraging their huge and comprehensive data sets. This data can help create transparency of outcomes, inform providers on best practices, and guide contracting decisions.

Payers may also use optionally more readily available data-driven insights. For instance, selectively contracting with providers based on minimum-volume thresholds can be a useful proxy for good quality. To correctly prioritize treatment decisions and reduce practice variation, payers need a sufficient level of trust from providers and patients. Public payers and private insurers have an opportunity to be on the brighter side and reduce the darkness. Accurately measuring costs and outcomes is the single most powerful lever we have today for transforming the economics of health care.

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