Variation in Health Care Spending Target Decision Making, Not Geography (2013) / Chapter Skim
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Other health care policy experts counter that supporters of the above policy proposal conflate the issue of improving value with that of reducing geographic variation. Some variation in health care spending is to be expected in an efficient health care system, reflecting "acceptable" -- meaning driven by genuine health needs -- differences in consumption of health care services by individual patients.
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The first study evaluated the accuracy of Medicare's geographic adjustment factors, which alter physician and hospital payment rates based on specific, geographically based input prices. The IOM released two related reports -- Geographic Adjustment in Medicare Payment -- Phase 1: Improving Accuracy and Geographic Adjustment in Medicare Payment -- Phase II: Implications for Access, Quality, and Efficiency -- in 2011 and 2012, respectively.
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to make recommendations for changes in Medicare Part A, B, and C payments, considering findings from task 1, as well as changes to Medicare payment systems under the ACA; and 3. to address whether Medicare payments for physicians and hospitals should incorporate a value index that would modify the payments based on geographic area performance.
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factors that account for variation; and identify the types of health care services with disproportionately high rates of variation that drive total variation. Specifically, the analyses examined the roles of such factors as patient health status and demographic characteristics, health plan, and price and market factors in accounting for geographic variation.
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Medicare spending, however, adjusted for regional differences in age, sex, and health status, is correlated only weakly with spending among the privately insured population (correlations of 0.08-0.11) at the HRR level.
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The committee determined geographic variation to be a true signal rather than a result of random noise, as regional differences in health care spending and utilization persist over time. The subcontractor analyses demonstrate that growth rates of Medicare spending and utilization are consistent over time for high- and low-cost regions in the country.
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has a negligible effect on geographic variation in Medicare spending. Beneficiary health status (Cluster 2)
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18 856 1,056 16 14 12 10 8 6 4 2 under 700 701–725 726–750 751–775 776–800 801–825 826–850 851–875 876–900 901–925 926–950 951–975 976–1,000 1,001–1,025 1,026–1,050 1,051–1,075 1,076–1,100 1,101–1,125 1,126–1,150 1,151–1,175 1,176–1,200 over 1,200 (2b) Medicare Spending, Adjusted for Age, Sex, and Health Status ($PMPM)
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Variation in total Medicare spending across geographic areas is driven largely by variation in the utilization of post-acute care services, and to a lesser extent by variation in the utilization of acute care services. To determine the extent to which variation in particular health care services contributes to total variation in Medicare spending, the committee disaggregated price-standardized, risk-adjusted Medicare spending into seven types of services: (1)
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play only a small role in variation in Medicare spending. Research and Data Limitations The committee's commissioned analyses evaluated quality of care using individual measures and the following nationally established composite quality indicators: a Prevention Quality Indicator (PQI)
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CMS should collaborate with private insurers to collect, integrate, and analyze standardized data on spending, as well as clinical and behavioral health outcomes, to enable more extensive comparisons of payments and quality and evaluation of value-based payment models across payers. EVALUATION OF THE USE OF A GEOGRAPHIC VALUE INDEX An important part of the committee's statement of task and research framework focuses on "whether Medicare payment systems should be modified to provide incentives for high-value, high-quality, evidence-based, patient-centered care through adoption of a value index (based on measures of quality and cost)
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Thus, the committee limited its evaluation of a "geographically based value index" to a relative ratio that uses area-level composite measures of clinical health outcomes and cost to adjust individual hospital and provider payments under Medicare Parts A and B ("a geographic value index") .4 Conclusion 3.1.
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Substantial variation in spending and utilization re mains as units of analysis get progressively smaller. A geographic value index for Medicare would have to generate hospital and provider payments perceived as fair.
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Collectively, these findings demonstrate considerable variation in spending and utilization that can be explained not by HRR-level factors but by factors at the smaller, HSA geographic level or even below that level, within HSAs. Spending Variation at the Hospital Level Within Hospital Referral Regions Hospitals within the same HRR vary substantially in their resource use, as can be seen from the committee's analysis of Dartmouth data on variation in hospital spending for cohorts of patients treated for three major conditions -- stroke, hip fracture, and heart attack.6 This variation among hospitals exists in both lower- and higher-spending HRRs, meaning there are high-spending hospitals in low-spending regions and low-spending hospitals in high-spending regions, as illustrated in Figure S-2.
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A study by Partners Healthcare found substantial variation in utilization and quality of health care services even within a single practice group comprising six primary care physicians. The study analyzed nine distinct quality measures applied to diabetes, cholesterol, and hypertension control; ordering of radiology tests and generic prescriptions; and rates of admissions and emergency department visits.
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Therefore, for a geographic value index to generate fair reimbursement rates, data would at a minimum have to indicate that performance across a wide range of quality measures was relatively consistent within an area. The Medicare and Harvard analyses found that areas with high scores on some quality measures do not necessarily have high scores on others, particularly if the measures relate to conditions treated by different types of specialists.
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RECOMMENDATION 2: Congress should not adopt a geographi cally based value index for Medicare. Because geographic units are not where most health care decisions are made, a geographic value index would be a poorly targeted mechanism for encouraging value improve ment.
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Hence, at minimum, they must foster care coordination among individual providers, as well as share data and track service use and outcomes to measure progress. Financial integration often hastens clinical integration.
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Therefore, payers can promote value through payment and organizational reforms that foster the above elements of clinical and financial integration. In fact, many payment reforms included in the ACA and tested in the commercial market (e.g., value-based purchasing, bundled payment, accountable care organizations, patient-centered medical home models, and dual-eligible care integration demonstrations)
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should conduct ongoing evaluations of the impact on value of the reforms included in Recommendation 3 by measuring Medicare spending and beneficiaries' clinical health outcomes. CMS should use the results of these evaluations to iteratively improve these payment models.
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Similarly, provider organizations will voluntarily accept new payment models only if they believe payments will cover their investment in the infrastructure required to achieve efficiencies, as well as generate bonuses or shared savings. Particularly in the beginning, therefore, instead of employing a mandatory approach, Congress might direct CMS to accelerate the adoption of payment reforms by authorizing differential payment updates for new payment models and traditional Medicare.
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