Cost and Quality of Health Care Provider Organizations in California: A Comparison of Value Metrics
*Susan Paddock, RAND Corporation
Keywords: cost, quality, value, stochastic frontier, hierarchical model
Public report cards and pay-for-performance programs are increasingly classifying health care providers that deliver relatively high-quality and low-cost care as high-value. One approach is to obtain quality and cost estimates separately prior to making a value classification. Alternatives include jointly modeling cost and quality using a regression framework. Using data collected from 160 provider organizations (PO) in California that participate in a value-based purchasing program targeting commercially insured HMO and point-of-service patients, we will examine whether there is a relationship between cost and quality and what it implies for whether bivariate modeling of cost and quality might improve upon alternatives. We also propose the use of stochastic frontier analysis (SFA) to develop a measure of efficiency for pay-for-performance and public reporting programs. Such a metric would summarize value conditional on either the quality of the care delivered or the cost of care. We will discuss the issues underlying construction of an SFA-based metric and compare it to alternatives.