Developing incentives for providers, patients, and insurers to use shared decision-making will help move the United States toward a value-based healthcare system.


Over the past four decades, researchers at The Dartmouth Institute for Health Policy and Clinical Practice have documented substantial variation in healthcare resource consumption among Medicare beneficiaries in the United States.a For geographically defined service populations, after adjustment for age, sex, race, and comorbidities, one finds considerable variation in per-capita use of procedures and per-capita Medicare expenditures, both overall and at the end of life. Dartmouth researchers have described variation in three types of healthcare services: “effective,” “preference-sensitive,” and “supply-sensitive” care.

Effective care refers to services that are of proven value and have no significant tradeoffs—that is, the benefits of the services so far outweigh the risks that all patients with specific medical needs should receive them. Unfortunately, in this country, only about half of patients who should receive effective care actually do.b Even well-known large group practices demonstrate substantial variation in their abilities to provide effective care.c The underutilization of effective care represents a wasted opportunity to prevent serious illness and improve quality; however, systematic efforts to improve adherence to evidence-based care result in improved health outcomes.d

Supply-sensitive care is influenced less by specific medical evidence and more by the relative availability and deployment of local resources. Examples include the frequency of physician visits, the use of specialists as opposed to primary care physicians, and the use of the hospital as a site of care. Evidence suggests that much of the variation in per-capita Medicare spending observed across both regions and academic medical centers is due to variations in discretionary decision-making that affect the utilization of supply-sensitive services.

Preference-sensitive care comprises treatments that involve significant tradeoffs affecting a patient’s quality of life. Decisions about these interventions ought to reflect patients’ personal values and preferences and should be made only after patients have enough information to make an informed choice. Examples include total hip arthroplasty, total knee arthroplasty, and spine surgery. 

Effectiveness in Reducing Unnecessary Care

Unnecessary care, whether a result of overuse of supply-sensitive or preference-sensitive care, is estimated to consume almost 10 percent of the healthcare dollar and is not associated with higher satisfaction or better health outcomes.f Evidence from the literature and observed variation in rates of supply-sensitive and preference-sensitive care across the nation suggest that local medical opinion has strong influence on the choice of treatment.g It is safe to conclude that current practice patterns do not reflect demand based on patient preferences, and that geographic variations in rates of surgery that reflect physician practice style will persist until patients are actively involved in the decision-making process. 

Although there is ample evidence that shared decision-making improves decision quality in preference- and supply-sensitive clinical situations, barriers to its widespread use need to be addressed with coherent plans for ensuring good standards, improving access to patient decision aids, training practitioners, testing practice models, and supporting broad adoption of successful methods.h Providing patients with the best scientific evidence in the form of patient decision aids and assessing their values and preferences aligns the clinical and policy missions of best practices. And including patients in the decision-making process lowers rates of healthcare consumption: Recent articles suggest that, if shared decision-making were to become an intrinsic part of the delivery service model used by healthcare delivery systems, even already low rates of preference-sensitive surgeries and hospitalizations might drop substantially.i 

Barriers to Implementation

Healthcare providers incur costs from allowing patients to participate in shared decision-making processes costs in two ways. First, providers incur the full, direct cost of providing coaching and tools: It takes providers time to understand patients’ values, clearly articulate benefits and risks of a variety of treatment options, and work with patients to align values and decisions. Second, because implementation of a shared decision-making process decreases patient demand for frequently lucrative healthcare services, providers also experience lost revenue from procedures that might have generated revenues but no longer will; benefits tend to accrue to insurers by virtue of their experiencing lower procedure-related expenditures.

For these reasons, shared decision-making processes will not be widely used until there are incentives for providers to implement them. 

Fortunately, several initiatives supported by accountable care organizations and the Center for Medicare & Medicaid Innovation are exploring widespread use of shared decision-making processes, with the costs of providing those services being borne, at least in part, by insurers. It is hoped that these efforts will lay the foundation for setting standards for providing decision support and measuring decision quality—defined in terms of patients’ knowledge about relevant treatment options, choice alignment with patients’ values, and expressed preferences for one option over the other.

Payment models of the future should include such measures of decision quality as well as measures of patient outcomes; benefits packages of the future should be designed to steer patients toward systems that have high decision quality and promote better patient outcomes. 

In short, an important goal for the U.S. healthcare system is to develop incentives:

  • For providers to employ shared decision making
  • For patients to use healthcare systems that have a clear track record of providing excellent outcomes and engaging patients in the decision-making process
  • For insurers to fund only the care that is wanted and needed 

These three levers are needed to move the nation toward a value-based healthcare system.

William B. Weeks, MD, MBA, is senior research scientist, The Dartmouth Institute for Health Policy and Clinical Practice, Lebanon, N.H.; a professor, The Geisel School of Medicine, Hanover, N.H.; and a member of HFMA’s New Hampshire-Vermont Chapter.


a. “The Dartmouth Atlas Project,” The Dartmouth Institute for Health Policy and Clinical Practice,

b. McGlynn, E., Asch, S., Adams, J., et al., “The Quality of Health Care Delivered to Adults in the United States,” New England Journal of Medicine, June 26, 2003.

c. Weeks, W.B., Gottlieb, D.J., Nyweide, D.E., et al., “Higher Health Care Quality and Bigger Savings Found at Large Multispecialty Medical Groups,” Health Affairs, May 2010.

d. Clark, D.D., Savitz, L.A., and Pingree, S.B., “Cost Cutting in Heath Systems Without Compromising Quality Care,” Frontiers of Health Services Management, Winter 2010; James, B., and Savitz, L.A., “How Intermountain Trimmed Health Care Costs Through Robust Quality Improvement Efforts,” Health Affairs, June 2011.

e. Fisher, E.S., Wennberg, D.E., Stukel, T.A., et al., “Variations in the Longitudinal Efficiency of Academic Medical Centers,” Health Affairs, 2004, supplemental web exclusive; Fisher, E.S., Wennberg, D.E., Stukel, T.A., et al., “The Implications of Regional Variations in Medicare Spending. Part 1: The Content, Quality, and Accessibility of Care,” Annals of Internal Medicine, Feb. 18, 2003; Fisher, E.S., Wennberg, D.E., Stukel, T.A., et al., “The Implications of Regional Variations in Medicare Spending. Part 2: Health Outcomes and Satisfaction with Care,” Annals of Internal Medicine, Feb. 18, 2003; Sirovich, B., Gallagher, P.M., Wennberg, D.E., et al., “Discretionary Decision Making by Primary Care Physicians and the Cost of U.S. Health Care,” Health Affairs, May-June 2008; and Wennberg, J.E., Fisher, E.S., Skinner, J.S., “Geography and the Debate over Medicare Reform,” Health Affairs, July-December 2002, supplemental web exclusives.

f. Yong, P.L., Saunders, R.S., Olsen, L., eds., Institute of Medicine, The Healthcare Imperative—Lowering Costs and Improving Outcomes: Workshop Series Summary, Washington, D.C.: The National Academies Press, 2010; Fisher, E.S., Wennberg, D.E., Stukel, T.A., et al., “The Implications of Regional Variations in Medicare Spending. Part 2: Health Outcomes and Satisfaction with Care,” Annals of Internal Medicine, Feb. 18, 2003.

g. Wennberg, J.E., O'Connor, A.M., Collins, E.D., et al., “Extending the P4P Agenda, Part 1: How Medicare Can Improve Patient Decision Making and Reduce Unnecessary Care,” Health Affairs, November 2007; Wright, J.G., Hawker, G.A., Bombardier, C., et al., “Physician Enthusiasm as an Explanation for Area Variation in the Utilization of Knee Replacement Surgery.” Medical Care, September 1999; Hawker, G.A., Wright, J.G., Coyte, P.C., et al., “Determining the Need for Hip and Knee Arthroplasty: The Role of Clinical Severity and Patients' Preferences,” Medical Care, March 2001; Weinstein, J.N., Bronner, K.K., Morgan, T.S., et al., “Trends and Geographic Variations in Major Surgery for Degenerative Diseases of the Hip, Knee, and Spine,” Health Affairs, 2004, Supplement Variation.

h. O'Connor, A.M., Bennett, C.L., Stacey, D., et al., “Decision Aids for People Facing Health Treatment or Screening Decisions,” Cochrane Database Systematic Reviews, July 2009; O'Connor, A.M., Llewellyn-Thomas, H.A., and Flood, A.B., “Modifying Unwarranted Variations in Health Care: Shared Decision Making Using Patient Decision Aids,” Health Affairs, 2004, Supplemental Web Exclusive.

i. Arterburn, D., Wellman, R., Westbrook, E., et al., “Introducing Decision Aids at Group Health Was Linked to Sharply Lower Hip and Knee Surgery Rates and Costs,” Health Affairs, Sept. 2012; Veroff, D., Marr, A., and Wennberg, D.E., “Enhanced Support for Shared Decision Making Reduced Costs of Care for Patients with Preference-Sensitive Conditions,” Health Affairs, Feb. 2013.

j. Sepucha, K.R., Fowler, F., and Mulley, A.G., “Policy Support for Patient-Centered Care: The Need for Measurable Improvements in Decision Quality,” Health Affairs, 2004, web exclusive supplement.

Publication Date: Friday, November 01, 2013

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