Perspective: Optimizing Health Care Resource Allocation - The Research Consortium For Health Care Value Assessment

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Sarah Litton
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September 21, 2018

A. Mark Fendrick, MD

George Miller

Beth Beaudin-Seiler

Stock photo of a jar of coins (American currency).

Traditional approaches to reducing health care spending often involve eroding coverage for care indiscriminately and fail to take a holistic perspective on all sources of costs and value. We believe that affordability in health care delivery is best achieved by efficiently allocating costs across the entire budget and spectrum of care.

The proper framework is to move from how much we spend to how well it is spent. Inefficient spending not only drives up costs but can negatively impact patient outcomes. Inefficient spending consumes resources that could be redirected toward both underused routine care (for example, colonoscopies, lifestyle counseling by primary care providers, and vaccinations) and underused innovative care that offers higher value (for example, hepatitis C drugs). A more efficient allocation creates the “headroom” for additional spending on high-value services.

Altarum responded to a funding opportunity from the PhRMA Foundation to build centers for value assessment by creating the Research Consortium for Health Care Value Assessment (RC-HCVA). Co-directed by George Miller at Altarum and Mark Fendrick at VBID Health, with David Meltzer of the University of Chicago chairing the advisory committee, the consortium will work toward optimizing the allocation of resources and promoting value in health care delivery; we will take a holistic perspective in identifying the greatest contributors to waste and support efforts to redirect resources toward high-quality, high-value care.

The Importance Of Defining Value

Defining value is critical to the mission of the RC-HCVA. A definition forces understanding of the compromises that must be made in addressing the inefficiencies in services, allocation of resources, and wasteful spending in health care. Christopher Moriates, Vineet Arora, and Neel Shah roughly define value as the output of health care per unit of cost. However, the outputs and costs that matter depend on the perspective of the stakeholder, whether provider, payer, or patient. Adding to this complexity is the fact that the outcome (clinical benefit) derived from a specific medical service depends on who is using it, who is delivering the service, and where it is being delivered; that is, the clinical nuance intrinsic to care delivery.

A long-term objective of the consortium is development and use of methods for comprehensive measurement of the magnitude and cost of low value care in the US. Altarum’s research has led to a framework for comprehensive identification and measurement of use of health care services that add little or no clinical value. The framework describes methods for using administrative claims data to track low-value care for a population of interest. We are now working toward implementing these methods for alternative populations to measure the frequency and expense of low-value care and identify the principal sources of low-value spending. Application of the methods with claims data representative of a specific population would allow measuring the extent to which low-value care is driving health care costs for that population, identifying clinical areas in which to focus efforts to reduce such wasteful spending, and tracking progress toward more effective use of health care funds.

The framework was designed to overcome challenges in measurement of wasteful spending, the most significant of which are the large number of clinical services that contribute to low-value care, the clinical nuance necessary to determine if a service was of low value in the particular circumstance under which it was delivered, and the fact that claims data—the most readily available source for identifying low-value care—frequently lack the clinical detail to make this determination. To address these challenges, our framework incorporates two measurement approaches.

Two Approaches To Measuring Wasteful Spending: “Additive” And “Comparative”

The “additive approach” begins with identification of services that can have low value and the circumstances in which use of the services constitutes low-value care. Sources such as the Choosing Wisely campaign provide lists of such services and circumstances. The additive approach involves developing and applying algorithms that codify low-value use of each such service (via identification of appropriate condition and procedure codes) to claims data, as illustrated by the work of Aaron L. Schwartz and colleagues and Carrie H. Colla and colleagues.

The “comparative approach” measures the frequency of per capita use of potentially overused services across geographic regions (adjusting to the extent possible for patient demographic and acuity differences). Differences in per capita use of each service (or group of services) provide a basis for identifying overuse in the locations in which the services are used more intensively. This is similar to the approach employed by the Dartmouth Atlas.

We are pursuing partnerships with provider and payer groups, including a large health care system and a state Medicaid program, to implement and test the framework. In the meantime, near-term research efforts under the consortium umbrella represent incremental steps toward application of these methods. One project involves tracking underutilization of five high-value services and inappropriate utilization of five low-value services over time to measure the extent to which spending on the representative high-value services is increasing and spending on the low-value services is falling.

Another project will test the ability of the comparative approach to accurately measure low-value spending by comparing results from application of the comparative approach with those from the additive approach. This project will investigate two concerns about the comparative approach: that the approach might not adequately control for patient acuity differences among geographic regions that could lead to differences in appropriate use of a service; and that the approach will not identify overuse of a service that occurs within all geographic regions.

A third project addresses the reliability of the additive approach in producing consistent estimates of low-value use of a service. This project stems from the observation that many recommendations for reducing low-value care are somewhat imprecise. For example, one of the Choosing Wisely recommendations is, “Don’t do imaging for low back pain within the first six weeks unless red flags are present,” leaving the identification of “red flags” to the clinical judgment of the provider.

Three groups of researchers (Aaron L. Schwartz and colleagues, Carrie H. Colla and colleagues, and Jodi B. Segal and colleagues) have developed somewhat different additive approach algorithms to measure the frequency of inappropriate use of imaging under this recommendation. When we applied these three algorithms to a consistent set of claims data (Maryland all-payer claims for calendar years 2014 and 2015), we found that estimates of the total cost of low-value use of this service ranged from a low of $22.1 million to a high of $40.5 million. The project will extend this investigation to a number of other services to better characterize the extent to which such differences exist and to investigate their causes.

These “quick strike” projects and other activities of the RC-HCVA will add to a growing knowledge base that supports measurement of value, identification of areas in which value can be improved, and tracking of progress toward a more efficient health care delivery system. Translation of the results of such research into practice will address the ultimate objective of the consortium: providing payers, providers, and other decision makers with tools that help them pursue optimization of the use of health care resources.

This blog was originally posted on Health Affairs and is reprinted with permission.

Altarum is a nonprofit organization that creates and implements solutions to advance health among vulnerable and publicly insured populations.
Optimizing Health Care Resource Allocation - The Research Consortium For Health Care Value Assessment


A. Mark Fendrick, MD

Dr. Mark Fendrick is V-BID center director and professor of Internal Medicine in the School of Medicine and professor of Health Management and Policy in the School of Public Health, both at the University of Michigan.
George Miller

George Miller - PhD, BSE, MSE

Fellow and Research Team Leader, Center for Value in Health Care

Areas of Expertise
  • Value of Health
  • Low-Value Care
  • Health Economics

Dr. George Miller is a fellow participating in Altarum's efforts to track national spending, analyze the drivers of spending growth, and quantify a sustainable spending growth rate. Dr. Miller received his BSE, MSE, and PhD degrees in industrial and operations engineering from the University of Michigan, where he subsequently served as an adjunct assistant professor.

Beth Beaudin-Seiler - PhD

Beth is a senior research analyst in the Altarum Center for Value in Health Care, where she has worked on multiple projects concerning the defining and measurement of low value care. Dr. Beaudin-Seiler holds a Ph.D. in public affairs and administration from Western Michigan University.