New UnitedHealth Group Report: High-Quality Care Can Be 14 Percent More Affordable on Average, But With Significant Local Variations

September 05, 2012
  • Research published in “Health Affairs” examines variability of care quality and costs using data from 250,000 physicians in 21 medical specialties across 41 states
  • Report offers four strategies to improve affordability, efficiency and quality of U.S. health care
  • Advocates payment system reform to incentivize more efficient care delivery and better health outcomes

A new report from UnitedHealth Group’s (NYSE: UNH) Center for Health Reform & Modernization evaluating care quality and medical costs among physicians across the country reveals that high-quality medical care can be about 14 percent more affordable on average, though there are significant local variations.

The report sheds new light on the opportunity to improve quality and efficiency in U.S. health care, and recommends four practical strategies for accelerating care provider payment reform to improve patient care.

The report, published in the special September issue of Health Affairs on payment reform and health care delivery, examines care quality and medical costs for episodes of care using data from nearly 250,000 U.S. physicians serving commercially insured patients nationwide. Previous research has focused mostly on Medicare; this may be the first such study to provide detailed representative national and regional data on variations in the quality and efficiency of care experienced by 175 million people with employer-sponsored and individual health care coverage.

The study finds that episode costs for a set of major medical procedures vary about 2.5-times, and episode costs for common chronic conditions vary about 15-fold. The study finds that, among physicians meeting quality benchmarks, there is essentially no correlation between average costs and the measured level of care quality across markets, suggesting that higher-cost areas do not necessarily provide higher-quality care.

It also shows that episode costs for physicians who earn both quality and cost-efficiency designations are, on average, about 14 percent lower than costs for other physicians across all of the specialties included in the assessment program. This suggests that changing incentives through payment reforms could help improve performance. (The designations are based on the UnitedHealth Premium® Physician Designation Program, which recognizes physicians that meet or exceed quality of care and cost-efficiency standards.)

“This research shows that for families across the nation, high-quality care can indeed be more affordable care,” said Simon Stevens, chairman of the UnitedHealth Center for Health Reform & Modernization, executive vice president of UnitedHealth Group and one of the report’s co-authors. “But these results underline the urgent need for effective new payment incentives, combined with appropriate support for dedicated care professionals, if the country is to capitalize on the scale of the improvement opportunity this research reveals.”

The article, “Wide Variation in Episode Costs Within a Commercially Insured Population Highlights Potential to Improve the Efficiency of Care,” is co-authored by Philip Ellis, Lewis Sandy, Aaron Larson and Simon Stevens, all of the UnitedHealth Center for Health Reform & Modernization. To read the full report, go to:

The study focuses on a set of common chronic conditions (e.g., asthma, diabetes, hypertension) and major medical procedures (e.g., cardiac catheterization, arthroscopic knee surgery, vaginal delivery). Data for this study are derived from the UnitedHealth Premium® Physician Designation Program, which involves nearly 250,000 U.S. physicians, operates in 41 states and covers 21 different medical specialties – including primary care, cardiology and orthopedics – which together account for more than 60 percent of the medical spending covered by UnitedHealthcare’s employer plans.

Under this program, quality is assessed using more than 300 measures including those endorsed by the National Quality Forum and the National Committee for Quality Assurance (NCQA), and others developed by medical specialty societies and expert physician panels. The UnitedHealth Premium® Designation program has been accredited under the NCQA’s Physician and Hospital Quality program and is aligned with Consumer Purchaser Disclosure Project standards. Efficiency is measured using actual medical costs, grouped into episodes of care, which are then compared with average costs for the same severity-adjusted episode delivered by other physicians in the local area.

Recommendations for Performance Measurement and Payment Reform

The study findings have implications for a wide range of payment reform initiatives, including primary care medical homes seeking to coordinate their patients’ care more effectively and incentivize quality and efficiency; accountable care organizations that take additional responsibility for the quality and total costs of care and for population health; and episode-based payment approaches, which is a model that pays for an entire course of treatment, rather than using the “fee-for-service” approach.

UnitedHealth Group is a national leader in testing and scaling these innovative care provider payment models. Drawing on this ‘real-world’ experience, the Health Affairs article concludes with four practical improvement strategies to accelerate payment reforms that will address the cost and quality opportunity:

  • Continue improving the sophistication of quality measures. The authors advise that leading health-related organizations “need to continue expanding the scope of evidence-based and physician-endorsed measures, including patient-reported outcome measures to help capture changes in patients’ health.”
  • Expand and share data to encourage more granular performance analysis.
  • ‘Customize’ payment reforms to recognize that care providers and communities are at different stages of readiness for new payment models, so a “one-size-fits-all” approach will not work. However, the article suggests that “most doctors and hospitals should be ready to adopt ‘performance-based contracting,’ which largely maintains existing payment methods but ties payment increases to performance on specific measures of quality and efficiency, such as readmission rates or prescribing rates for generic drugs.”
  • Help doctors and hospitals by providing tools and other support, not just new incentives. “History has shown that simply promulgating new performance-based payment incentives will not by itself ensure that care improves,” the article states. “To succeed under new payment arrangements, hospitals and physicians will need to have in place strong governance mechanisms; effective financial systems … and a robust set of clinical programs that they can employ to help manage their patients’ care and support patients in managing their own health.”

About the UnitedHealth Center for Health Reform & Modernization
The Center assesses and develops innovative policies and practical solutions for the health care challenges facing the nation. Drawing on UnitedHealth Group’s internal expertise and extensive external partnerships, its published work is available at

About UnitedHealth Group
UnitedHealth Group (NYSE: UNH) is a diversified health and well-being company dedicated to helping people live healthier lives and making health care work better. With headquarters in Minnetonka, Minn., UnitedHealth Group offers a broad spectrum of products and services through two distinct platforms: UnitedHealthcare, which provides health care coverage and benefits services; and Optum, which provides information and technology-enabled health services. Through its businesses, UnitedHealth Group serves more than 75 million people worldwide. Visit for more information. 

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