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Buffalo Niagara Medicare cost ranks fourth lowest in U.S.

Metro Buffalo enjoys the fourth-lowest Medicare costs in the country, according to a new federal report that indicates health care is a bargain in upstate New York compared with other parts of the nation.

The report by the Institute of Medicine, which advises the federal government on health policy, found that Medicare costs in the Buffalo area are $166 lower than the national per-beneficiary, per-month average.

Those findings bode well not only for local residents on Medicare, the federal health program for seniors and the disabled, but also for everyone in the Buffalo area.

That’s because health experts view Medicare costs as one of the few – and best – windows into the overall cost of health care in metro regions.

“The IOM report confirms that consumers in upstate New York get great value for their health care dollars,” said Christopher Booth, CEO for Univera Healthcare’s parent company, Excellus Health Plans Inc. of Rochester – the metro area with the nation’s lowest Medicare costs, according to the study.

What’s more, the majority of local Medicare beneficiaries who belong to insurer-run Medicare Advantage plans appear to be receiving good care for the money.

While holding the line on costs, the Buffalo area’s three top providers of Medicare Advantage health plans – BlueCross BlueShield of Western New York, Independent Health and Univera Healthcare – all receive “excellent” ratings in the National Committee for Quality Assurance’s latest Health Plan Report Card.

“You don’t want to achieve low spending at the expense of quality,” said Dr. Jamie Kerr, Univera’s vice president and chief medical officer for utilization management.

On the contrary, the local health care system’s leaders seem to have engineered a double win: quality care at low cost. And they’ve gone at it by cooperating with each other.

“The major takeaway from the report is that collaboration works,” said Dr. Richard Vienne, vice president and chief medical officer at Univera. “That is what brings down the cost of care.”

Health care leaders in the Buffalo area have been pushing collaborative efforts to cut costs and improve care for more than a decade.

Most prominently, local insurers and medical providers teamed up years ago to form HEALTHeLINK, an electronic network that links patients, doctors and insurers so they can easily share medical records and thus avoid costly duplicative paperwork and tests.

Local insurers and health care providers also joined forces 11 years ago to form the P2 Collaborative of Western New York, an effort to talk up healthy lifestyles while making health care more widely available and efficient.

And that’s just the start. Independent Health and 140 primary care doctors last year announced a program called the Primary Connection to emphasize care coordination, teamwork, greater use of data to track quality and costs, and payment arrangements that reward quality of care and not just the amount of care.

In 2012, the Catholic Health System formed an “accountable care organization” for Medicare patients, in which doctors, hospitals and other providers form networks to coordinate care and measure performance across multiple settings – from the doctor’s office and hospital to the home care agency and nursing home.

In accountable care organizations, doctors and hospitals take on joint responsibility and share in the financial risks and rewards for the health of their patients. That’s different from the current fee-for-service payment system that critics say is fragmented and beset by avoidable hospitalizations and duplicative tests.

Catholic Health’s Medicare accountable care organization enrolled 30,000 patients with an assumption that costs would increase at a rate of about 2 percent over the first year.

So far, overall spending on the patients is 2.7 percent below the starting target rate, said Dennis Horrigan, chief executive officer of Catholic Medical Partners, the physician group that represents the 900 doctors affiliated with Catholic Health.

Collaboration isn’t the only reason local health care costs are low.

Local health care experts note that Medicare reimbursements for services are based partly on a region’s costs, and the cost of living in Buffalo is lower than many other parts of the nation.

Additionally, there is a long history here of strong, local nonprofit insurance companies, heavy state regulation of health services and a large proportion of the population in cost-efficient HMOs.

“These forces tended to apply downward pressure on costs,” Horrigan said.

Local insurers have heavily promoted HMOs for the senior set, called Medicare Advantage plans. One key factor behind the low cost of Medicare locally could be the popularity of those plans: In Erie County, nearly 54 percent of seniors belonged to such plans last year, compared with only 28 percent nationwide.

And while the costs of medical procedures vary widely among providers, The Buffalo News reported in May that overall, local hospitals simply charge less for many major procedures that Medicare patients tend to need.

Out of the 306 regions of the country, this region ranked 298th in the average charge for the treatment of heart failure, 301st in the charge for treating sepsis and 305th in the charge for joint replacement.

Low Medicare costs appear to be a trend across upstate New York.

Syracuse ranked 19th, Binghamton 25th and Elmira 26th in the Institute of Medicine’s study of 306 metro areas.

On the other end of the spectrum was Miami, with Medicare costs that were a whopping $435 more than the national average.

The 178-page, $8.5 million report is the most definitive look at an issue that health care experts have studied for decades – why the use, cost and quality of health services vary so greatly from region to region and even among hospitals and doctors in the same region. Those differences exist even after you take into account the income, race, age and health conditions of patients.

In a commentary in the journal Health Affairs, other health care experts praised the study.

Many of the factors that influence health care quality and costs are local, they wrote, suggesting that efforts to control health care costs also focus on encouraging collaboration within regions.

But the experts said the report didn’t stress strongly enough that dysfunctional regional health systems are characterized by fragmented hospital care and post-acute care facilities eager to absorb discharged patients.

They described how it’s the natural instinct of physicians and hospitals in local health care systems to protect their financial health by expanding and defending their market share – even if it means higher costs.

To counter those trends, the Centers for Medicare and Medicaid Services, which manages Medicare, has started to encourage projects with hospitals and doctors that emphasize value in health care, said Joseph New-house, a Harvard University economist who led the study.

Policymakers must “sort which innovations work well and which don’t work so well,” he said in a briefing.

Five Lowest Medicare Spending Regions

Rochester, N.Y.

Stockton, Calif.

Sacramento, Calif.

Buffalo, N.Y.

Bronx, N.Y.

Five highest Medicare spending regions

Miami, Fla.

McAllen, Texas

Monroe, La.

Houston, Texas

Alexandria, La.

Source: Institute of Medicine

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