The Geography of Health: Rethinking Value-Based Payments

Abstract

Geographic location—specifically ZIP code—profoundly influences health outcomes and healthcare costs, with research suggesting up to 60% of a person's health status is determined by social and environmental conditions associated with where they live. This paper examines the significant disparities between communities, revealing how some areas experience nearly three times the emergency department utilization rates of others, resulting in cost differentials exceeding 50%. The research proposes a comprehensive framework for integrating Social Determinants of Health (SDOH) into value-based payment contracts through five key mechanisms: SDOH-adjusted risk models, informed cost benchmarking, provider incentive restructuring, alternative payment model enhancements, and refined attribution methodologies. While valuable data sources exist to support geographic analysis, the challenge lies in effectively integrating diverse sources into actionable insights—a process requiring substantial investment and specialized expertise. As healthcare transitions to value-based models, organizations that successfully leverage geographic insights will be better positioned to address social needs proactively, ultimately building a more equitable and effective healthcare system that delivers value across all communities. This geographic perspective represents not just an analytical approach but a fundamental shift in how healthcare organizations understand and address population health needs.