adequate risk-adjustment of claims data, it is suggested that with savings of this magnitude for just three conditions, the potential across all conditions and populations could be substantial. Chandra concludes that these findings support a broader message that, despite the inefficiencies within the American healthcare system, it is possible to save both money and lives.

Using a similar approach of benchmarking, Elliott S. Fisher of Dartmouth College details analyses demonstrating that decreased use of discretionary services in the Medicare program could save approximately $50 billion a year, or approximately 20 percent of current spending. However, he simultaneously acknowledges that this analysis does not account for the significant variation that occurs within regions nor does it specify the policies needed to reduce the observed variations. In conclusion, Fisher suggests that therefore a gradual transition toward a more frugal healthcare system is not only possible but that it could yield substantial savings without lowering quality.

Narrowing the focus to individual clinical decisions, David Wennberg of Health Dialog discusses the use of shared decision-making models as a method for reducing costs as well as for more effectively empowering patients to take control of their treatment decisions. By empowering informed and shared choice by patients through the use of decision aides, Wennberg concludes that the use of surgical procedures, for instance, could be reduced by 20 percent compared to controls. Based on the evidence, he asserts that systematic application of shared decision making (SDM) could reduce total U.S. healthcare expenditures between 1 and 5 percent. Wennberg cautions that data are still needed to assess the financial impact of provider-based SDM on total expenditures, and the effect benefit designs and reimbursement models could have on increasing use of SDM. However, given the potential savings, he recommends a paradigm shift from informed patient consent to informed patient choice.

SAVING MONEY (AND LIVES)

Amitabh Chandra, Ph.D., Harvard University; Jonathan S. Skinner, Ph.D., M.A., and Douglas O. Staiger, Ph.D., Dartmouth College


In a climate of growing concerns about how much our country spends on health care, it is increasingly important to know what we are getting for our money. Previous research has demonstrated a negative relationship between quality and spending at the regional level. However, findings at the level of the Hospital Referral Region (HRR)—a geographic designation devised for the Dartmouth Atlas of Health Care, reflecting referral hospitals’ typical service areas—do not lend themselves to actionable policy. This paper examines the relationship between mortality and spending at an actionable level—in hospitals.



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