A new study finds that the Rochester, N.Y., area has the lowest overall Medicare
spending rate in the nation, a feat health officials attribute to aggressive regional planning that keeps a lid on unneeded hospital expansions and technology upgrades that insurers
ultimately pay for.
The Institute of Medicine
report found that Rochester's Medicare spending rate per beneficiary was $174 lower than the national monthly mean among 306 U.S. regions.
Rochester's success at holding down costs provides a model that New York Gov. Andrew Cuomo's administration wants to take statewide. Essentially, a standing regional advisory committee made up of various healthcare stakeholders reviews the need for new departments, new staffing and expensive pieces of equipment and recommends against those that aren't needed in the community.
For example, if an orthopedic practice wanted to buy its own MRI machine and the hospital two blocks away had one that could accommodate those patients, the committee would recommend against it. Insurers can use its recommendations to set reimbursement policies.
Experts say the approach tackles the two biggest drivers of rising medical expenses: new technology and salaries. The idea is that those expensive items have to be paid for somehow and they create a need for health care providers to order up more tests and treatments, the cost of which are ultimately passed on to patients and insurers.
"Supply-driven use of services is one of the major drivers of unwarranted, wasteful health care expenses," said Dr. Martin Lustick, chief corporate medical director for Rochester-based nonprofit insurer Excellus BlueCross BlueShield.
State Health Commissioner Dr. Nirav Shah called Rochester's "a phenomenal model."
"The governor's plan is to do regional planning across New York using Rochester as the example," Shah said. "It's about bringing rationality to the system. It's about adult supervision and not a Wild West. Right now, supply drives demand."
Institute researchers say U.S. health care cost $2.7 trillion in 2011, almost 18 percent of the gross domestic product and higher than other developed countries.
The institute, a nonprofit arm of the National Academy of Sciences, advocates payment reform to push competition toward value rather than toward volume of services, including the Medicare system that covers 39 million people age 65 and older and 8 million with disabilities.
"The chaotic free market health care system costs Americans a bundle," said Blair Horner, legislative director of the New York Public Interest Research Group, adding there would probably be pushback from providers against regional committees limiting their expansion plans. "Rochester offers a way to do it better."