The Effects of Quality of Care on Costs: A Conceptual Framework

When assessing a health care system or a facet of care, the fundamental dimensions of performance should include the quality of the care provided and the economic costs related to receiving that care. The U.S. health care system does not function well on either dimension. The most comprehensive study of quality to date found that for adults, care adhered to basic recommendations about what should or should not be done only 55 percent of the time (McGlynn et al. 2003). Although health outcomes in the United States lag far behind those in Canada, Australia, Germany, France, and the United Kingdom, in 2009, per-capita health care expenditures were about twice as high (Commonwealth Fund Commission 2011). Policymakers and observers have recently become hopeful, however, about the possibility of improving quality while simultaneously saving money (IOM 2010a, 2010b, 2010c). Accordingly, numerous studies have examined the costs attributable to poor quality, the relationship between performance on quality measures and health care expenditures, and the costs and health effects associated with improvement programs. Several new policies have been designed to spur improvements in quality and reduce health care costs in the United States, such as establishing accountable care organizations, incentives for adopting health information technology, and penalties for hospital-acquired complications (Berwick 2011; Blumenthal 2011; Kaushal et al. 2006; Milstein 2009). When policymakers, researchers, and other decision makers work on a policy issue like this one, a shared framework can create a common understanding of the issues and facilitate the design of analyses. We know of no conceptual model or framework, however, that describes how specific dimensions of quality produce variations in health care and other types of costs. Even so, the authors of well-known conceptual models addressing quality have contemplated economic matters. Donabedian excluded costs from his well-known quality-of-care model, choosing to focus on clinical issues rather than value-laden questions of balancing costs against health benefits (Donabedian 1980). Yet during the same time period, he published several articles on health care costs, including one describing a production function for health outcomes at different expenditure levels (Donabedian, Wheeler, and Wyszewianski 1982). In 2001, the Institute of Medicine (IOM) defined six dimensions of quality: effectiveness, safety, efficiency, timeliness, patient-centeredness, and access (IOM 2000, 2010a). Effectiveness and safety relate to increasing the likelihood of favorable health outcomes. Efficiency is an economic construct, which the IOM defines as maximizing performance (i.e., health care outcomes) by producing the best possible outputs from a given set of resources or inputs (IOM 2010a). In the field of health economics, several conceptual frameworks focus on efficiency, but agreement about how to define efficiency and the related concept, value, is limited (AQA 2006; IOM 2009, 2010a; McGlynn 2008; Medicare Payment Advisory Commission 2006; National Quality Forum 2010; Palmer and Torgerson 1999). Yet none of these works describes how quality influences costs or efficiency. The lack of such a conceptual framework creates a confusing situation in which numerous analyses purport to examine quality and costs but each analysis measures something different from the next. Table 1 illustrates this phenomenon using examples of studies addressing glycemic control for type 2 diabetes mellitus over the long term or the treatment of uncomplicated low back pain. Some studies report structural measures of quality, such as implementing an integrated program that helps primary care physicians manage diabetes, along with the costs of conducting the program. Others describe process measures, such as adhering to guidelines that recommend active modalities for physical therapy for low back pain, and estimate associated health care expenditures. Finally, some authors have estimated changes in health outcomes and outcome-related costs, such as reductions in macrovascular complications with improved glycemic control and the associated health care and disability costs. While there are valid reasons for choosing different measures of quality and costs, a conceptual framework would make it easier to understand the selections made. A framework would also remind researchers of variables that may be conceptually relevant, preventing their inadvertent omission from an analysis. TABLE 1 Examples of Studies Addressing the Quality of Glycemic Control among People with Type 2 Diabetes Mellitus or Quality of Care for Low Back Pain and Some Measure of Cost Given these considerations, we offer the Quality-Cost Framework. For examples, we used studies of glycemic control for type 2 diabetes and of the treatment of low back pain. We selected these conditions because they are common; their care affects clinical outcomes as well as associated costs; and some quality problems and interventions have been well studied. Before describing the Quality-Cost Framework, we must define quality of care and costs because the terms’ connotations vary (Donabedian 1980). Our framework emphasizes “health-related quality,” which we define by drawing from Donabedian's 1982 exposition on quality and costs: “The highest quality care is that which yields the greatest expected improvement in health status, health being defined broadly to include physical, physiological, and psychological dimensions” (Donabedian, Wheeler, and Wyszewianski 1982, 976). Our framework distinguishes health-related from non-health-related dimensions of quality (those not expected to affect health) for three reasons: (1) improving health is the fundamental objective of health care; (2) health-related and non-health-related dimensions of quality influence costs differently; and (3) the two types of dimensions can sometimes be negatively associated. Consider, for example, satisfaction, an important dimension of quality from the patient's perspective (Browne et al. 2010). Satisfaction appears to have both health-related and non-health-related components. Some studies show that higher satisfaction is associated with better health outcomes, yet perhaps surprisingly, other investigations have found the reverse, including one nationwide study that found higher patient satisfaction with outpatient care was associated with increased mortality (Browne et al. 2010; Fenton et al. 2012). On the one hand, patient satisfaction promotes adherence to treatment (Browne et al. 2010), which should improve outcomes. On the other hand, providers sometimes face stark choices between promoting satisfaction and optimizing health. One example is deciding whether to discontinue opioids for patients with chronic, noncancer pain who exhibit vague signs of misuse, which may indicate an increased risk for addiction and overdose. In addition to occasionally conflicting with the goal of improving health, striving to improve satisfaction can also promote discretionary health care expenditures. Amenities such as concierge services, luxury waiting areas, and gourmet hospital meals increase discretionary health care expenditures but produce no health benefits. Both patients and society value—and may be willing to pay for—non-health-related dimensions of quality, including services that improve satisfaction but not physical or psychological health. Yet to facilitate distinctions between higher-value and lower-value health care, a framework examining the effect of quality on costs should distinguish non-health-related from health-related expenditures. To define costs, the framework focuses on health care and health status–related costs. Health care costs are expenditures for health care and costs to patients and families, such as the value of time spent in care, self-care, and informal caregiving activities; and the expenditures related to these activities, such as for special diets. Health status–related costs are costs related to declines in the ability to function (which we refer to as “functional-decrement costs”), and the economic value associated with losses of quality and quantity of life. We discuss specific categories later.