At both the state and national level, sustainable, long-term health-care reform has three goals: extending health insurance to the currently uninsured, improving the quality of care, and ensuring that costs reflect the value of the care that patients receive. Massachusetts has lead the nation on the first goal but will have to now wrestle with the other two challenges. Bringing quality up and costs down in hospitals whose performance lags has emerged as a key component of long-term health-care reform. Achieving this goal on a national scale, however, may by stymied by both logistical and political resistance. Looking instead to improve hospital performance to the levels achieved by their better-performing peers within their own local area – rather than asking them to attain national benchmarks that may seem quite removed from local resources, practice styles, and capabilities – may be a more viable alternative, particularly because there is suggestive evidence that hospitals are able to “learn” practices from other nearby hospitals.

Using measures of quality and low-value spending that are relatively robust to differences in patient mix and illness burden, we show that achieving local benchmark performance would raise quality by almost as much as achieving national benchmarks. Achieving local quality benchmarks would also go a long way in reducing the disparities in the quality of care received by black and white patients. However, local benchmarks would not go as far in reducing low-value spending. These results suggest that policies that focus on local benchmarks, which may be most feasible, may not sacrifice much in terms of quality improvements, making them an attractive option for setting goals in future health reforms.

Of course, establishing the value of local goal-setting does not tell us the best way to achieve those local goals. Reducing spending on low-value care while improving the overall quality of care delivered is likely to require the deployment of many policy levers, including provider payment and insurance system reform. While these reforms are likely to be politically and practically difficult to achieve, setting effective metrics by which to gauge success is may help smooth the path.

The full policy paper from Professors Chandra and Katherine Baicker is here.

Amitabh Chandra
Professor of Public Policy
Kennedy School of Government, Harvard University