Our analysis adds to the existing literature addressing the cost of improving quality of care for diabetes in two important ways. First, our work explicitly focuses on the cost implications of improved quality of care from the health care payer perspective. Second, the analysis uses a nationally representative sample to estimate the direct health care expenditures associated with improving glucose management, for which recent data have been limited.
Among adults with type 2 diabetes from the CQI study, we observed substantial underuse of HbA1c testing and medication adjustment. Ensuring that 100 percent of these essential care processes are provided would increase annual health care expenditures by U.S.$327 per person with diabetes, largely due to greater use of antihyperglycemic medications. HEDIS scores would improve for 29 percent of patients with diabetes, and payers would spend U.S.$1,128 on additional health care services per person with an improved score (U.S.$555–1,021 if hospitalizations for glycemic crises decline).
In addition to greater utilization of health care services, quality improvement programs and incentive payments to providers can also affect the costs and clinical outcomes associated with improving glucose management. Myriad quality improvement strategies have been attempted for diabetes, but the costs of implementation and oversight (as opposed to health services) have been reported in few studies (Shojania et al. 2006
). Some disease-management and patient-education programs cost U.S.$481–1,500 and the UKPDS implementation program cost U.S.$321 per patient annually (all inflated to 2009 dollars) (Sidorov et al. 2002
; Clarke et al. 2005
; Keers et al. 2005
; Rothman et al. 2006
; Currency Converter for 164 Currencies [database online] 2008
;). In one pay-for-performance program that paid physicians incentives equaling 1.5–7.5 percent of fees, monitoring of HbA1c tests increased substantially and hospitalization rates declined (Chen et al. 2010
). However, the effectiveness of pay for performance remains unclear overall and it can have unintended consequences (McDonald and Roland 2009
). Restructuring physician payment systems could align reimbursement with the resources involved in monitoring HbA1c testing and titrating medications; costs would depend on how these activities are valued. Summarizing the available information on the cost of improving glucose management, the total incremental cost of essential care processes, quality improvement programs, pay-for-performance incentives (U.S.$8–57 based on 1.5–7.5 percent of average diabetes-attributable outpatient physician costs), and hospitalizations for glycemic crises would be U.S.$490–1,853 annually per person (ADA 2008b
). Average per-patient diabetes-attributable health care expenditures for those older than 45 are U.S.$5,450–10,400 (inflated to 2009) (ADA 2008b
); therefore, providing 100 percent of essential care processes would represent a 3–6 percent increase and the total incremental cost would represent a 4.7–34 percent increase.
Two additional factors could also affect the costs and outcomes associated with glucose management: payers' pharmacy benefit management programs and patients' adherence to recommended care. Pharmacy benefit programs have the potential to influence which diabetes medications patients receive and also whether patients choose to fill prescriptions (Austvoll-Dahlgren et al. 2008
). Because the data we used included many brand-name prescriptions, medication costs could be lower and adherence higher if more generics are used. Poor adherence to recommended testing and medication therapy by patients is common and associated with both worse HbA1c levels and higher health care expenditures (Balkrishnan et al. 2003
; Cramer 2004
; Karter et al. 2004
; Rubin 2005
; Sokol et al. 2005
;). On the other hand, one study found that uncontrolled HbA1c levels are more commonly due to provider failures to intensify treatment than patient nonadherence (Schmittdiel et al. 2008
). Our cost estimates accounted for patient nonadherence in two ways. First, we based medication costs on actual pharmacy expenditures rather than medication prices. Second, assumptions about the effect of improving care processes on HbA1c values were well within the range of documented effects of quality improvement interventions.
Although insurers often pay for the additional care processes that patients receive when quality is improved, researchers seldom examine the financial and health effects that are most relevant to payers. Indeed, the general public in the United States may be uncomfortable with the idea of payers conducting business-case analyses for any service, including quality improvement efforts. Yet payers often do consider cost-effectiveness when deciding which services to cover (Luce 2005
). Because the interests of payers and society might sometimes be misaligned, it is important for public policy makers to examine short-term cost-effectiveness to payers as well as long-term cost-effectiveness to society. For glucose management, the potential differences between the payer and societal perspectives are particularly relevant to the Medicare program. A third of people with diabetes are age 65 or older and diabetes-attributable health care expenditures for this age group reached U.S.$65 billion in 2007 (ADA 2008a
). Because diabetes is often diagnosed in late middle age, receiving poor versus adequate glucose management early on has the potential to affect Medicare expenditures a decade or more later. Consequently, private health care payors' policies regarding quality-of-care today can influence future Medicare expenditures.
Health care payers can apply our results in a manner analogous to how policy makers apply cost-effectiveness analyses performed from the societal perspective (Stokey and Zeckhauser 1978
). First, a payer can determine whether the additional expenditures are within its budget. Next, the payer may consider whether improving glucose management is a good value. When assessing value, policy makers generally consider lifetime costs and health effects, and can, in theory, set a maximum acceptable cost per quality adjusted life year (e.g., U.S.$50,000). For payers, the incremental cost per patient newly attaining a HEDIS goal is a more useful metric of cost-effectiveness because it enables payers to consider costs as well as an outcome linked to future profitability. If a payer can predict the potential effect of raising its HEDIS scores on future enrollment and, in turn, the relationship between enrollment and profitability, it can determine whether the anticipated expenditures for improved glucose management may be balanced by an equal or greater rise in profits. Alternatively, a payer can judge subjectively whether a particular per person with an improved HEDIS score is a good value.
Other recent studies have examined the cost-effectiveness of improving quality of care for diabetes from the societal perspective. Using NHANES data for 1998–2004 and the Archimedes model, Kahn et al. (2008)
found that the maximum feasible attainment of HEDIS goals for diabetes over 30 years would cost U.S.$56,666/QALY (inflated to 2009). Kahn and colleagues also estimated that increasing the attainment of HbA1c <7 percent from 42 percent to 60 percent of the 5.7 million U.S. adults with diabetes would prevent 652,000 myocardial infarctions and add 15 million years of life nationally (Saaddine et al. 2006
; Kahn et al. 2008
;). A second recent study evaluated a program that improved the management of blood glucose, cardiovascular risk factors, and microvascular complications at a national network of community health centers in 1998–2002. Using data from this program and the Eastman model, Huang et al. (2007)
predicted that retinopathy, blindness, end-stage renal disease, and coronary artery disease would decline significantly and that the cost-effectiveness ratio would be U.S.$40,439/QALY (inflated to 2009) from the societal perspective.
Although we did not examine cost-effectiveness from the societal perspective, our analysis provides specific data on the direct cost of improving glucose management, which was lacking in these two prior publications. The study by Kahn and colleagues merely assumed that the additional care processes would cost U.S.$4,142 per patient annually (inflated to 2009), which substantially exceeds our estimate of U.S.$327. In the UKPDS, costs related to health care services were about U.S.$300–1,500 greater for intensive than conventional management (inflated to 2009 dollars) (Gray et al. 2000
; Clarke et al. 2001
; CDC Diabetes Cost-effectiveness Group 2002
; Currency Converter for 164 Currencies [database online] 2008
). Because our analyses and Kahn's are both from the same period and based on national samples, we used our estimate of the direct costs to recalculate Kahn's cost-effectiveness ratio, which then declined to U.S.$44,869/QALY.
Clearly, improving quality of care for diabetes represents an excellent value from the societal perspective. Payers may also believe it to be a good value from their perspective, given the small increase in annual costs involved and the incentives created by the HEDIS program. Indeed, payers' widespread use of disease management programs suggests that they already believe this.
Our data have several limitations. Since the CQI study began, more patients are on antihyperglycemics and mean HbA1c levels have declined (Saaddine et al. 2006
; Alexander et al. 2008
;). Sensitivity analyses modeled these trends by increasing, for the status quo scenario, the percentage of patients receiving recommended HbA1c tests and medication adjustments. Given our analysis included only 821 people, findings may not be representative; however, we did draw from a national sample and included other large studies in sensitivity analyses. Our estimate of medication expenditures was based on four health plans in one state, but it is within a wide range reported in prior studies. A strength of our analysis is that we used actual medication expenditures, rather than average wholesale prices, to account for negotiated price discounts and patient nonadherence. Lastly, we did not distinguish the perspectives of public and private payers.
In conclusion, ensuring that people with diabetes receive 100 percent of the essential care processes pertaining to glucose management will generate modest increases in total annual per-patient health care expenditures attributable to diabetes. Our results enable payers to consider short-term costs and outcomes that are important from their perspective.