DHCFP analysis found that the rates and costs of preventable hospitalizations have not increased measurably in recent years. Given that other health service categories have experienced average annual growth rates of 5 percent or more, it does not appear that preventable hospitalizations are driving health care cost growth in general. However, the total costs of preventable hospitalizations in Massachusetts are not insignificant, accounting for 8 percent of total inpatient costs, or 3 percent of total health expenditures. Preventable hospitalizations are also higher in age and socioeconomic groups linked to insufficient access to primary care services.
It is widely agreed that the best approach to reducing preventable hospitalizations is to effectively manage many chronic conditions between non-acute health care settings. However, the prevalent fee-for-service payment system offers disincentives to providers for working together to reduce the use of unnecessary or duplicative services, or to engage in care management activities that reduce the need for more expensive healthcare. This incentive structure, inherent to the fee-for-service payments, is increasingly seen as an obstacle to delivering efficient, coordinated care.