High-quality hospitals deliver lower-cost care for 82% of diagnoses, according to a new analysis that Advisory Board released today on variations in care that do not improve care costs or patient outcomes.

The data from the Advisory Board's analysis of 468 hospitals indicate a typical facility could save up to $29 million annually by delivering care in line with cost benchmarks for high-quality hospitals.

"Achieving a realistic chunk of this savings opportunity, however, will require most health systems to rethink how they prioritize, set and embed care standards," said Steven Berkow, Executive Director, Research at Advisory Board, an Optum, Inc. business.

Clinical leaders have long sought to improve care quality by reducing unwarranted care variation. Health system CEOs and CFOs are now counting on this clinical strategy to help bend the health care cost curve as well.

System savings goals from care variation reduction (CVR) increasingly range from $50 to $150 million. In the latest Annual Health Care CEO Survey, C-level health system executives told Advisory Board that their No. 1 concern for 2018 is preparing the enterprise for sustainable cost control and No. 2 is innovative approaches to expense reduction.

According to Mr. Berkow, "CVR is one of the few avenues for generating the level of savings needed to withstand downward pressures on hospital revenues without negatively impacting care, and hopefully improving it."

Safely Bending the Healthcare Cost Curve

Many health systems have sought evidence that the potential savings from CVR can be significant enough to help bend the healthcare cost curve—and achievable without compromising care quality and outcomes.

At their request, the Advisory Board analyzed new cost and quality data from more than 20 million deidentified patients across 468 hospitals. The resulting research shows that meaningful CVR is both attainable and more effective than traditional cost-cutting.

"Our high-performer benchmark is based on high-quality care, not low cost," explained Veena Lanka, MD, Senior Director, Research at Advisory Board.

More specifically, the Advisory Board defined a separate top-quality cohort using four well-established patient outcome indicators, like the complication rate and found that these high-quality hospitals typically delivered lower-cost care for comparable patients.

A typical hospital spends up to 30% more to deliver care with comparable or lower-quality outcomes than the top-performing cohort. Dr. Lanka underscored that "Eliminating this cost gap is not realistic due to underlying clinical, demographic, and operational differences between organizations that are difficult to control for within study design fully."