New Marketplace I

New Marketplace Survey: Physicians and Hospitals Differ on How to Reduce Costs

Insights Report · March 3, 2016

Analysis of the first NEJM Catalyst Insights Council survey on the New Marketplace theme. Qualified executives, clinical leaders, and clinicians may join the Insights Council and share their perspectives on health care delivery transformation.

Data from the first survey of NEJM Catalyst opinion leaders are in, and — no surprise — they show that physicians and hospital/system leaders have different ideas on the best ways to reduce health care spending.

The survey queried health care executives, clinician leaders, and clinicians on where they saw marketplace opportunities for improving quality and efficiency — and what they were actually doing. Respondents were asked about:

  • Top initiatives to improve efficiency and quality
  • Percent of patient care revenue involving risk sharing with payors
  • Percent of patient care revenue dependent on quality benchmarks or improvement
  • Actions to control spending on high-priced drugs
  • How to cut 5% of costs without a harmful impact on patients

This initial survey also gives a first look at the respondents to NEJM Catalyst Insights Surveys. Our 297 respondents represent leaders across a range of sectors, with a heavy bent toward providers and hospital-affiliated experts in particular. This first set of data from the NEJM Catalyst Insights Council shows the Council is both sizeable and occupies leadership roles in a broad range of provider organizations.


  • In December 2015 and January 2016, an online survey was sent to the NEJM Catalyst Insights Council, which includes U.S. health care executives, clinician leaders, and clinicians at organizations directly involved in health care delivery. A total of 297 completed surveys are included in the analysis. The bounds for a 95 percent confidence interval around any reported result with N=297 are +/-5.7%.

  • Respondents are fairly evenly split among executives (27%), clinician leaders (32%), and clinicians (41%). Most of the respondents described their organizations as hospitals (36%) or health systems (19%). These hospitals were predominantly mid-sized (36% had 200-499 beds) or larger (53% had more 500 or more beds).

  • Only 11% indicated that their major affiliation was with a physician organization. Those physician organizations tended to be big – 73% had 100 or more physicians.

  • Most of the organizations (72%) were non-profit. Every region of the country was well represented.

When asked what percent of their organization’s revenue from patient care involved risk sharing with payors, only 6% said more than half. Overall, respondents indicated that risk-sharing was simply not an emphasis — 20% said none of their patient care revenue was tied to risk, 19% said 0.1 to 5%, and 32% said they did not know.

New Marketplace Insights Report Chart: Percent of Patient Care Revenue Involving Risk Sharing with Payors

New Marketplace Insights Report. Click To Enlarge.

Incentives for improving quality were only slightly more prominent. Most respondents (64%) said they had either less than 5% of revenue tied to achieving quality goals, or did not know the percentage of revenue.

New Marketplace Insights Report Chart: Percent of Patient Care Revenue Dependent on Quality Benchmark/Improvement

New Marketplace Insights Report. Click To Enlarge.

In short, many respondents had some financial incentives for improving quality or efficiency, but, in general, the percentage of revenue that was dependent on either type of performance was small.

Initiatives to Improve Efficiency

The respondents describe a wide range of initiatives aimed at improving efficiency at their organizations, with the most frequently cited (65 percent) being high risk care coordinators. The second most frequently cited response was use of incentives to keep care within the organization (40 percent). This approach does not necessarily improve efficiency; that depends on whether internal providers have lower costs and prices than the alternatives, or are able to practice more efficiently as a result of a common affiliation among the various providers caring for a patient.

In fact, the desire to maintain or grow revenue — rather than to improve efficiency — may motivate programs to keep care inside an organization. The share of respondents reporting their employers are shifting care to lower cost settings or developing internal prior authorization program for high-cost drugs or tests was noticeably lower (32 percent and 27 percent, respectively).

In short, the picture painted by these data is that, at this point, provider organizations tend to deal with pressure for efficiency by adding systems (i.e., care coordinators) and trying to increase their market share of care that is delivered. Changing how care is actually delivered is a less attractive option.

New Marketplace Insights Report Chart: Top Initiatives to Improve Efficiency

New Marketplace Insights Report. Click To Enlarge.

Breaking out responses by different categories of respondents reveals that respondents from physician organizations have a different idea of what constitutes “low hanging fruit” than those from hospitals or delivery systems. Most of the physician organizations (52%) indicated that they were using incentives to shift care to lower cost settings, versus only 33% of hospital and 26% of health system respondents. These three groups were nearly identical in their use of high risk care coordinators (70%, 70%, and 68%, respectively). These data suggest that hospitals, health systems, and physician organizations faced similar pressures for efficiency, but were responding differently.

On the other hand, the health systems were more inclined to put groups of physicians at risk for total medical expenditures for populations of patients (capitation) than either hospital or physician organization respondents (42% vs 21% and 21%, respectively). One possibility is that health systems can put groups of physicians at risk, while hospitals and physician groups lack either the skills or infrastructure to implement risk-sharing, or the interest in doing so.

Other findings in segmenting the data include:

  • Larger organizations (by patient revenue) were more likely to use high risk care coordinators and have incentives for keeping care within system.
  • Capitation was most common in the North East (38%) and North West (32%), and least common in the South (0-9%), perhaps reflecting greater penetration of for-profit entities in the South.

Initiatives to Improve Quality

The respondents viewed high risk care coordinators as one of their most important responses to improve quality as well as efficiency. Many of them reported having chronic disease teams and financial incentives at the individual physician level for improving quality, with variance reporting at an individual clinician level. Same-day visits as a standard were not uncommon — 26% of respondents indicated that their organizations were offering them.

New Marketplace Insights Report Chart: Top Initiatives to Improve Quality

New Marketplace Insights Report. Click To Enlarge.

When these data were analyzed by the type of organization of the respondents, the differences were more subtle than for efficiency measures. Health systems and physician organization respondents were more likely to have financial incentives at the individual physician level for quality (both 39%) than hospitals (32%). Hospitals and health systems were more likely to have teams organized around chronic diseases (38% and 30%) than physician organizations (15%).

Same-day access for appointments was apparently easier to implement in smaller organizations. More than one-third of the respondents from organizations with patient revenue below $500 million per year indicated that they were offering such appointments, versus only 13% of those with revenue more than $5 billion. There were no major indications that bigger organizations offered more initiatives to improve quality.

Actions to Control Spending on High-Priced Drugs

Just over half of the organizations indicated that they were using a formulary to try to control spending on high-cost drugs, complemented by educational efforts. Respondents from hospitals were more likely to have stricter formularies compared with health systems or physician organizations (65% vs 53% and 39%, respectively). These differences presumably reflect both the ability of hospitals to address drug selection, as well as the urgency to do so because much of drug spending is a cost center. Health systems may be less effective at imposing tight formularies both because patients have a greater impact on outpatient drug selection, and because they may not directly bear much risk for outpatient drug spending. Finally, few physician organizations appear to have the incentive and/or ability to address drug spending directly.

Most organizations’ respondents reported having an in-house team developing that formulary (74%).

New Marketplace Insights Report Chart: Actions to Control Spending on High-Priced Drugs

New Marketplace Insights Report. Click To Enlarge.


The data from this first NEJM Catalyst Insights Council survey paint a picture of a health care system in which there are still only small proportions of revenue at risk based upon efficiency or quality. Organizations are taking some steps to improve both, but they naturally emphasize the initiatives that are most urgent and least painful to execute.

We did not see evidence that “bigger is better” — i.e., that bigger organizations were more likely to do more to improve quality and efficiency. In fact, some data indicate that initiatives (e.g., same day appointments) might be more difficult to implement in bigger and more complex organizations.

A final reaction: different parts of the health care system respond to different incentives, and leaders probably need to tailor thinking about competition and pressure for improvement for different settings.

Beyond that final reaction, one more — we need more data. We’ll be coming back to the Insights Council in that search.


If you had to cut 5% of costs without harmful impact on patients, what would you do first?

“Eliminate unnecessary screening tests.”

“Decrease expensive drugs.”

“Address senior leadership incentives so they align with the goals for the organization, i.e., Make them held accountable for across the board goals. For example, have CFO accountable for quality goals and CMO accountable for some financial goals. By doing so, they would be forced to work more collaboratively  and hopefully would share data leading to mutual and aligned improvement.”

“Destroy morale of the clinic.”

“Eliminate positions.”

“Analyze where current costs go and assess where we are related to benchmarks.  We are already in top 5% for high-quality/low-cost ACO so this would be a difficult exercise.”

“Bundled payments for elective surgery.”

“Currently at rock bottom. Only choices now impact on salaries and benefits such as health insurance, work schedule, etc.”

“I would employ the use of non-traditional patient interactions.  Instead of having follow-ups for well controlled disease, I would use RN visits to ensure that all is going to plan, and only if there were concerns then they would go on to MD/DO staff.”

“That would be impossible.”

Join the Insights Council and contribute to the conversation about health care delivery transformation. Qualified members participate in brief monthly surveys.

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