Improving Value

Centers of Excellence

Ample evidence demonstrates widespread variation in treatment approaches, costs and quality when it comes to treating patients with moderate to complex conditions. For more than a decade,1 Centers of Excellence (COE) have been deployed as a strategy to address the patient harm that arises from this unwarranted variation such as unnecessary spending, inadequate clinical outcomes and poor patient satisfaction.2  

COEs are designated groups of providers that meet high standards for both the quality and the cost of care for a particular service or set of services. Common examples are non-emergent and complex specialty services, such as total joint replacement, heart surgeries, spine surgeries, bariatric surgeries, cancer and transplants.3 COEs generally feature high concentrations of expertise centered on particular medical areas and deliver care in a comprehensive, integrated, interdisciplinary fashion.

The evidence for these programs is mixed but COEs can potentially help address a number of health system problems. 

Identifying True Centers of Excellence

Although COE designations have been made by professional organizations (such as the American College of Surgeons) or payers, including the Centers for Medicare and Medicaid Services as well as commercial payers, this designation can also be applied at will by health care establishments.4,5  

Ideally, a COE would produce superior clinical outcomes and high patient satisfaction, deploy truly integrated care teams, be experts in patient shared-decision-making, and address barriers to achieving equitable outcomes. CEOs that emphasize care coordination and the use of patient shared decision-making should leverage the improved outcomes and efficiencies associated with these strategies to price their services fairly and consistently. Moreover, in return for the COE designation, providers may be willing to accept a lower negotiated price in return for a greater volume of patients. 

Case Study 1

Walmart employees who thought they needed spine surgery were encouraged to visit a Center of Excellence, which includes Rochester, Minnesota based Mayo Clinic and Danville, Pennsylvania based Geisinger Medical Center. Between 2015 and 2018, more than half (54 percent) of Walmart employees who were seeking treatment for spine pain avoided surgery because they visited a Center of Excellence. Choosing a Walmart-recommended hospital also resulted in shorter hospital stays, lower readmission rates and few postsurgical care needs. Patients were able to return to work nearly three weeks sooner than those who went to a hospital that had not been recommended.  While Walmart reported spending $32,177 per patient for spine surgery, a higher charge than that at non-Centers of Excellence, the company said it saved money overall because of surgeries that were avoided and better outcomes.6 


But not all COE programs are alike. Lack of a concise definition7 or trusted accreditation body has contributed to mixed evidence with respect to the desired COE outcomes. For example, some studies showed improvements in postoperative complication rates while others found insufficient evidence of improvement.8  

Case Study 2

In 2006, the Centers for Medicare & Medicaid Services ruled that Medicare would pay for bariatric surgery only if it was performed at an American Society for Metabolic and Bariatric Surgery (ASMBS) Center of Excellence or an American College of Surgeons (ACS) level 1 bariatric surgery center. However, research suggests that outcomes for patients who undergo bariatric surgery are no better at facilities that perform a larger number of these procedures or that are designated as Centers of Excellence. After examining this study and many others, a Medicare review group concluded that the COE designation does not provide improved outcomes for Medicare beneficiaries. Because of this, Medicare removed the requirement that bariatric surgery be performed only in COEs.9 


A Role for COEs

Given the widespread variation in treatment patterns, outcomes, and cost for a given clinical episode, there should be a role for Centers of Excellence in our health system. In theory, this approach can bring order to a chaotic health system and improve outcomes. It can also reduce the market power exercised by some providers by providing a viable alternative for treatment. Furthermore, for rare conditions, it may make sense to concentrate expertise in a few locations. 

The key to realizing these gains is to have rigorous and comprehensive cost and quality criteria for identifying true COEs, as well as monitoring to ensure their treatment remains superior to that of other providers. 

Consumer Considerations

To encourage consumers to obtain services from high-value COE providers, payers or employers typically lower or waive out-of-pocket costs for their members or offer them a reward for seeking care at the COE. Moreover, because COEs can inconvenience consumers by requiring them to travel great distances, payers or employers often cover the travel costs for both the patient and a companion. 

Payers should preserve patient choice by ensuring that non-COE facilities are a meaningful option. Employer-based programs may impose higher cost-sharing on patients if they don’t use the COE. If that cost-sharing renders the alternative option unaffordable, it isn’t a meaningful choice.  In addition, these programs must be transparent about the criteria used to designate a provider as the COE option. Patients should be able to detect if the criteria is truly rigorous and up-to-date, or whether the designation is window-dressing applied to the low-cost provider. 


1. Lowes launched its COE for non-emergency cardiac procedures in 2010. Robinson, James C., and Kimberly MacPherson, "Payers Test Reference Pricing and Centers of Excellence to Steer Patients to Low-Price and High-Quality Providers," Health Affairs, Vol. 31, No. 9 (September 2012).

2. Payers may also feel they are harmed by this variation, but ultimately it is the patient who pays the cost, whether through premiums, lost wages, taxes or another mechanism. 

3. Delbanco, Suzanne F., et al., "Centers of Excellence," Urban Institute & Catalyst for Payment Reform (April 2016). 

4. Elrod, James K. and John L. Fortenberry, Jr., "Centers of Excellence in Healthcare Institutions: What They Are and How to Assemble Them," BMC Health Services Research, Vol. 17, No. 17 (Supplement 1), (July 11, 2017). 

5. Wu, Sze-Jung, et al., "Finding the Value in Value-Designation: Evidence and Opportunity in the United States," Managed Care (November 2016). 

6. "How Employers are Fixing Health Care," Harvard Business Review (March 2019). See also: Garrity, Mackenzie, "Walmart Sees Benefit of Flying Employees to Top Hospitals for Care," Becker's Hospital Review (March 15, 2019). 

7. Measurable criteria, such as number of cases treated, clinician training, electronic recording and management systems, results for key quality measures, and staffing composition are all criteria that have been used to distinguish COE. See: Wu, Sze-Jung, et al., "Finding the Value in Value-Designation: Evidence and Opportunity in the United States," Managed Care (November 2016). 

8. Ibid. 

9. Sugerman, Deborah Tolmach, "Centers of Excellence," JAMA, Vol. 310, No. 9 (September 4, 2013).