Report: Healthcare costs vary by region, so solutions must vary too

As industry stakeholders look to drive down rising healthcare costs, a consistent trend emerges: Geography matters, and it causes significant variation.

Tracking regional differences is crucial to ensuring all valuable voices are brought to the table to address the issue, according to a new report (PDF) from the Network for Regional Healthcare Improvement.

NRHI tracks healthcare costs across six benchmarking areas: Colorado, Utah, Oregon, Maryland, Minnesota and St. Louis, Missouri. In Maryland, for example, costs for patients with private insurance were 20% lower than the national average in 2016, while in Colorado costs were 19% higher than average that year. 

Costs were also below average in St. Louis and Utah, by 6% and 4% respectively and higher by 11% in Minnesota and 4% in Oregon. 

NRHI has been monitoring these cost trends over the past several years and found they’ve remained fairly consistent over the three years of study. Maryland’s costs are consistently lowest among the six regions and were 14% below national average in 2014 and 16% lower in 2015. Colorado and Minnesota, meanwhile, were consistently close competition for the study’s highest costs in that same window. 

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Regional variation in healthcare costs isn’t new, but NRHI’s team said that having a handle on these trends across different areas makes it clear that the industry can’t find a national, one-size-fits-all solution to the problem. 

“The way we receive healthcare in the United States is broken, and as a result Americans are paying too much and are less healthy than in other developed nations,” Ellen Gagron, NRHI’s executive director for healthcare affordability, said. “There are ways we can work together to change the system, but we need trusted data to focus our collective efforts and measure our shared success.” 

To further highlight the differences, the report broke out specific care settings and their associated costs. In Maryland, the greatest savings were in outpatient care, where costs were 34% below the national average, while pharmacy costs were just 3% below average. 

By contrast, outpatient costs in Colorado were 34% above average in 2016. Professional costs were the lowest in that state, at 2% over the average. 

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States participating in the research are already using the findings to develop responses, for example. Colorado has taken the results and is now pushing for greater price transparency, passing a piece of legislation that requires freestanding outpatient providers to use unique, national identifiers when billing. 

In Oregon, HealthInsight, a regional healthcare improvement collective in the state, has been offering this data to providers, payers and policymakers, which has spurred legislators to create workgroups to investigate costs and possible solutions. 

“Legislators see it as an important source of information as they consider how to create a higher-value healthcare system for our state,” Meredith Roberts Tomasi, associate executive director at HealthInsight, said