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How to reduce medical costs the easy way

Here’s one very effective way to reduce medical spend.

  1. Identify low-cost providers.
  2. Send your patients to them.

Do NOT send your patients to providers because they give a discount.

Do NOT send patients to providers because those providers are “in network.”

Fact is, there is wide variation between and among providers in the same geographic area – for the same procedure.

Another fact is, there’s no correlation between cost and “quality”.

There you have it.

15 thoughts on “How to reduce medical costs the easy way”

    1. HI Mike – happy to!
      check the url link- low cost refers to price. There’s quite the disparity between and among similar providers for the same procedure in the same area.

  1. Joe, I believe your call is one we have been hearing for a while now, that payers are looking for “outcomes” and not lowest cost. It is very important to understand outcomes in relation to clinical performance (is X provider better at healing workers than Y provider?), overall total cost of care (e.g. price per visit as well as number of visits required by both X and Y) as well as quality (e.g. difference in service levels, communication, worker engagement, worker satisfaction between X and Y). The workers’ comp world has evolved into stratified, multi-faceted shopping for providers and payers should think in those terms.

    1. Julian, Joe, et al, Finding low “cost” providers is critical. However, many buyers in the workers’ compensation buy based on “price” as opposed to “cost.” Those are two dramatically different terms. Low “price” does not always result in low “cost.” Low “cost” is attained by high quality by reducing utilization, recidivism, and improving RTW. Thanks.

  2. Thanks Joe.
    I agree with Julian. We occasionally get patients in our Orthopedic clinic after they have been in Occ Med or Urgent care clinics for months. They have already had diagnostic studies, medications and Physical Therapy. As far as the TPA and adjuster are concerned the clock starts ticking based on the date of injury and first time the patient was seen by a Physician. Several times our diagnosis is different and more specific. The treatment plan can also change. The TPA still tends to hold us to the time table from the doi and initial MD visit. Thus sometimes we wont accept the patient in this scenario and it usually involves us participating in networks.

  3. Joe: at long last there are analytical programs to ascertain cost effective/quality providers. The difficulty is how this information is spread to the populace. While payors may have this information, and medical groups/health systems may have this information, getting to true transparency will be the challenge. Imagine a health system or provider publishing its quality cost data….wow. Then again, the legal/med-malpractice regulatory world world would have to be modified to provide some protections as this information could be used against a provider (at some point).

    2). The whole nature of limited networks is premised on the payor/health system stating that their network is the most cost effective/quality focused. Yet that data is not readily available to the consumer/public.

    3). widespread publication of this information (and without charge I might add) is needed to give patients the information needed to effectively choose provider(s) and health systems/payors.

    1. That was my first thought as well; how do you get data to determine low cost providers if you want to go it alone and your own data is limited?

      Second thought was that calculating “cost” would have to include all aspects of treatment. For example, if you send an injured worker to a further away provider to save $10 but end up paying $16 more for mileage reimbursement then you have actually increased your medical spend.

      1. Greg – thanks for the comment. The linked article provides excellent insights into other sources for data. There are terabytes of data – and some really good information – available from a variety of sources.

        Cost should include all aspects of treatment – as well as litigation and disability duration.

  4. There was a cartoon I clipped years ago:…. The clerk behind the counter says to the customer, “I have high quality and low prices…which do you want?”

    High quality in healthcare should result in overall low cost based on total cost for the treatment (from date of initial visit to discharge).

  5. The biggest mistake that carriers made, was PPO. Once they did that they would up encouraging utilization at higher priced facilities. Realistically those facilities are important, but they should not be used for routine procedures, ,and Routine is the norm for about 85%-90 % of all procedures. It’s that 10% that drive cost and we need to do a better job there.

  6. Your comments in this post are right on the mark Joe. Predictive analytics that support pricing transparency and provide quality markers are becoming more popular and sophisticated can be used to help understand the drivers of total cost for the market.

  7. It’s nice to see when things are presented in powerfully simple ways.

    I’d suggest making a small change to your list. Perhaps the following might better address some of the comments as well:

    1. Identify the providers who deliver the greatest value
    2. Send your patients to them

    Value = Quality/Cost

  8. Everybody is taking about sending to low cost providers but the challenge remains how to identify them. What are the real parameters to judge, are we real sure of them or it’s all fluff with predictive analytics..

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Joe Paduda is the principal of Health Strategy Associates




A national consulting firm specializing in managed care for workers’ compensation, group health and auto, and health care cost containment. We serve insurers, employers and health care providers.



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