A role for OHSU in reducing the cost of health care

John McConnell, Ph.D., speaks at an event announcing the Silver gift and NIH grant.

By John McConnell, Ph.D.

Figuring out a way to control the growth in health care costs is one of the most critical challenges facing our generation. Health care costs are at the core of the long term debt questions for the federal government and recent budget shortfalls here in our own state. As a health economist, this is both daunting and exciting – and I think OHSU can play a significant role in finding answers.

In response to systemic challenges, the State of Oregon is embarking on a multi-billion dollar experiment that is unlike anything we’ve seen in the history of health care. While there have been a few demonstration projects aimed at cost control, and some recent movement by other states, Oregon has made a bold step toward cost containment.

The state has transitioned its Medicaid program to Coordinated Care Organizations, or CCOs. Oregon has also made an agreement with the Federal government – in exchange for $1.9 billion, Oregon will reduce the rate of healthcare spending by 2 percent. A failure to meet this benchmark without holding quality constant at the same time will mean the loss of hundreds of millions of dollars.

This combination of factors makes Oregon fertile ground for high quality studies. OHSU has a role to play – not just as a provider participating in reform – but as an academic center providing rigorous, independent analysis of what works and what doesn’t. And the truth is, when it comes to knowing what works in the health care system, we are in the dark ages.

The Oregon experience can help us understand how to tackle the important challenge of cost control. There are several elements at play.

First, as noted above, we have a hard target for cost savings, the likes of which we have never seen.

Second, the structure of CCOs includes several innovations of interest. For example, CCOs themselves will be subject to global budgets, which many policy experts believe is the most promising way to move toward cost control.

In addition, CCOs have an explicit focus on the integration of physical, behavioral, and dental health care within a primary care home. Although there is a great deal of experimental evidence that this type of coordinated care should improve care and hold costs down, it has not been rigorously disseminated in the way that Oregon is attempting.

So, we want to know – will it work? If so, when does it work best, and why? If not, where did it go wrong? With new funding from the National Institutes of Health (NIH) and the Silver Foundation, announced this week, OHSU’s Center for Health Systems Effectiveness (CHSE) will provide answers to these questions.

For example, if savings are accomplished, are they accomplished through reductions in inefficient use – unnecessary hospitalizations, as everyone hopes –  or through reductions in payment rates, which is what providers and systems fear.

The influx of funding provides the capacity for OHSU to be at the forefront of the research that will answer critical questions of national importance. At CHSE, we are excited about providing the economic and analytic horsepower to this project, as well as developing partnerships with researchers and stakeholders throughout Oregon to develop and disseminate our findings.

It is my hope and belief that 5 years down the road the world is going to know a lot more about what works in health care and that OHSU will have made major contributions to answering those questions.


John McConnell is an associate professor and health economist at Oregon Health & Science University. He also serves as the director of OHSU’s Center for Health Systems Effectiveness.

He received his Ph.D. from Stanford University and spent a year at the University of California at San Francisco before moving to Oregon. His current research includes an analysis of the impacts of Oregon’s 2007 Mental Health & Chemical Dependency “Parity” law and a study of management practices in U.S. hospitals. Dr. McConnell has worked closely with Oregon’s policy-makers and is currently acting as an advisor to the state on reimbursement reform.