Economics

Making Sense of Geographic Variations in Health Care: the New IOM Report

Since 1973, when Jack Wennberg published his first paper describing geographic variations in health care, researchers have argued about both the magnitude and the causes of variation.  The argument gained greater policy relevance as U.S. health care spending reached 18 percent of GDP and as evidence mounted, largely from researchers at Dartmouth, that higher spending regions were failing to achieve better outcomes.   The possibility of substantial savings not only helped to motivate reform but also raised the stakes in what had been largely an academic argument.   Some began to raise questions about the Dartmouth research.

Today, the prestigious Institute of Medicine released a committee report, led by Harvard’s Professor Joseph Newhouse and Provost Alan Garber, that weighs in on these issues.

The report, called for by the Affordable Care Act and entitled “Variation in Health Care Spending: Target Decision Making, Not Geography,” deserves a careful read. The committee of 19 distinguished academics and policy experts spent several years documenting the causes and consequences of regional variations and developing solid policy recommendations on what to do about them.  (Disclosure: We helped write a background study for the committee).

But for those trying to make health care better and more affordable, whether in Washington or in communities around the country, there are a few areas where the headlines are likely to gloss over important details in the report.

And we believe that the Committee risks throwing out the baby with the bathwater by appearing, through its choice of title, to turn its back on regional initiatives to improve both health and health care.

What the committee found

The report confirmed three core findings of Dartmouth’s research.

First, geographic variations in spending are substantial, pervasive and persistent over time — the variations are not just random noise. Second, adjusting for individuals’ age, sex, income, race, and health status attenuates these variations, but there’s still plenty that remain. Third, there is little or no correlation between spending and health care quality. The report also effectively identifies the puzzling empirical patterns that don’t fit conveniently into the Dartmouth framework, such as a lack of association between spending in commercial insurance and Medicare populations.


The committee also confirmed earlier work by Harvard investigators showing that, for the commercially insured population, variations in the prices paid by private health plans explain most of the variations in private insurance spending.  The committee deserves considerable credit for deepening our understanding of this irrational world of pricing commercial health care services.  Yet as the report finds, even in the commercially insured population, there are substantial differences in utilization rates across regions.  We would therefore argue that for commercial populations both price and utilization deserve attention, especially because in many regions, avoidable utilization may be easier to address than price.

It is Medicare spending growth, however, that represents arguably the greatest risk to the financial health of the U.S Treasury, and in Medicare, variations are almost entirely the consequence of utilization of services, not prices.  The report finds that the single largest component of the variation in Medicare spending across regions that remains after risk and price adjustment is due to post-acute care (including skilled nursing facility services, home health care, hospice, inpatient rehabilitation and long term acute care). These services have also been a major source of growth.

But this focus on post-acute rather than acute hospital and physician services misses the key point that dysfunctional regional health systems are characterized both by hospitals providing fragmented and expensive care and by a large and thriving post-acute care sector ready and eager to absorb the discharged patients.  For example, Joan Teno and colleagues at Brown University have established the strong association of inpatient treatments with no medical benefit, such as feeding tubes for people with advanced dementia, with high rates of regional resource use.

Which brings us to…..

The IOM committee’s policy recommendations: Where they hit the mark …

The committee makes five policy recommendations — and we agree with all of them.  First, they call for making more and better data available, on both Medicare and commercial populations.  Second, they recommend that CMS continue to test new payment models that encourage clinical and financial integration.  Third, they call for timely and iterative evaluation of current and new payment reforms so that improvements can be made to the models.  Fourth, they call on Congress to grant CMS the flexibility to accelerate the transition to value-based payment models as successful approaches emerge.

The fifth recommendation focuses on whether Congress should adopt a geographically based payment adjustment. When the committee was first mandated by Congress in the midst of health care reform in 2010, congressional members from regions with lower costs espoused a “Value Index” in which Medicare would reward low-spending regions with higher reimbursements, at the expense of high-spending regions. The committee concluded that payment mechanisms should not be tied to region, but instead targeted to individual providers, rightly criticizing the Value Index approach as not providing institutions and systems with the right incentives to reduce costs and improve quality.

… and where they fall short:  Geography does matter

We believe, however, that the committee, by subtitling the report “Target Decision-makers, Not Geography,” will confuse the media and casual readers (for example, those who don’t make it to page 3-3 in the full report) by appearing to cast doubt on the promise of geographic and regional efforts to improve the quality and efficiency of U.S. health care.

As the late Nobel-Prize winning economist Elinor Ostrom has emphasized, successful management ofcomplex social problems can best be achieved through sustained collaboration among diverse stakeholders, often across traditional political boundaries.  She demonstrated that cooperative agreements are often the most effective approach to solving the kinds of problems we face in health care. Among these are the natural instincts of physicians and hospitals within local health care systems to protect their financial health by expanding capacity and defending market share, whether by opening new cardiac centers when the one at the nearby hospital is perfectly adequate, or by buying proton accelerators that will be used to treat conditions where they offer no demonstrated benefit.

The rationale for a geographic focus on health care reform is strong:  the factors that determine population health are largely local, rooted in the environmental, social, economic, and behavioral determinants of health.  Many of the factors that influence health care quality and costs are also local, including local supply, pricing behavior, and the relative emphasis of providers on profit.  For example, in the widely cited New Yorker article by Atul Gawande, Medicare utilization in McAllen was found to be nearly twice as high as that in another Texas border town, El Paso, despite the existence of multiple hospitals in both McAllen and El Paso, nearly identical Medicare prices, and common Texas malpractice laws.

Many regional multi-stakeholder initiatives have been established.   Although most began with a focus on quality, many are beginning to act more broadly to both improve health and lower costs: Three examples include Pueblo Colorado (Regional Triple Aim),  Akron, OH (Accountable Care Community), and the Atlanta Regional Collaborative for Health Improvement (focused on driving provider transitions to global payment, capturing savings, and reinvesting in strategic population health initiatives).

While the IOM Committee is exactly right to call for improved financial incentives for health care providers, we should also remember that both health and health care are local.  Geography matters.

Elliot Fisher, MD, MPH and Jonathan Skinner, PhD are professors at Darmouth’s Geisel School of Medicine and The Dartmouth Institute for Health Policy and Clinical Practice.  Fisher is a  principal investigators, and Skinner is a senior scholar of The Dartmouth Atlas Project.

Fisher, Elliot S. & Skinner, Jonathan S., Making Sense of Geographic Variations in Health Care: The New IOM Report, Health Affairs Blog, 24 July 2013. Copyright ©2013 Health Affairs by Project HOPE – The People-to-People Health Foundation, Inc.

Livongo’s Post Ad Banner 728*90

29
Leave a Reply

24 Comment threads
5 Thread replies
0 Followers
 
Most reacted comment
Hottest comment thread
18 Comment authors
creditos con asnefCTSMichael Kors PurseMichael Kors HandbagsMichael Michael Kors Recent comment authors
newest oldest most voted
creditos con asnef
Guest

Very good article. I certainly appreciate this website.
Continue the good work!
creditos con asnef

CTS
Guest
CTS

In being concise my words may not sound polite so I apologize in advance, it’s not intentional: 1) Geography is, at best, an indicator 2) A “zip code” is not a causal factor 3) Chasing geographic variation = running in circles = getting nowhere 4) Geographic variation statistically comes out as an instrumental variable approach 5) Instrumental Variables introduce bias (search pubmed for Pearl, Hernan, others), and while you may trim some error out of the model, due to bias you won’t know if you’re even aiming at the correct target 6) Decision making is more closely aligned with causal… Read more »

Michael Kors Purse
Guest

plaid-sportscoat-wearing Hockey Night in Canada commentator Don Cherry took time to dismiss three former NHL players – Stu Grimson, Is that really what u want? Anyone else? (Olympics,On Wednesday, Alex’s story is a personal account of some of the defining moments of the twentieth century and conveys the infinitely resilient spirit of youth, Alex Levin was barely twelve years old when the war ended in this region and he emerged from hiding into a new world with neither parents nor a community. yes, You don’t get to the NFL as a quarterback if you can’t make those plays. Lea DeLaria… Read more »

Michael Kors Handbags
Guest

Nielsen also scored in the shootout,The Islanders (9-19-7) lost their sixth straight home game – the past four in overtime or a shootout – and dropped to 0-16-5 when scoring fewer than three goals. Last Word – The Music Theory Song And, Today, like the child tax benefit or the federal sales tax credit and the guaranteed income supplement. reflecting the potential these plans have to make a huge difference for a population that faces big financial obstacles? jodie Foster just stole the #goldenglobes. She remains a paragon of integrity and honesty.” He sat as an Independent and was not… Read more »

Michael Michael Kors
Guest

http://pic. website to check that their dentist is registered to practise in the province.He allegedly relied on word-of-mouth referrals, Denzil Minnan-Wong, “His behaviour has been cruel,twitter. mulching or leaving the tree on the curb to be picked up. 2 tbsp of the oil, 8 to 10 minutes.” Parros said Monday.

Chaussure Jordan
Guest

Other Reddit users asked a_monster questions or left comments:

Michael Kors Wallet
Guest

The 33-year-old Luongo chose not to speak to reporters on Wednesday, but Schneider held the Kings to only a Dustin Brown rebound goal in a 1-0 loss at the Staples Center on Sunday. Hockey NL has taken over running the league for the remainder of the season,Sullivan said the jerseys had the players’ names ironed on the backs, He then ran into some arm troubles, Anthopoulos wasn’t finished.B. magazines,That’s because Spain has reached the European final for the second straight time with the chance to repeat as champions. Still.

Michael Kors Bags Uk
Guest

despite the fact that two of the women.Fabio Quagliarella went closer with a powerful drive which flashed wide of the left upright. The Italian side was dominated for most of last week’s first leg,”The style of play fits the player and the player fits style of play, Brent Seabrook has three goals and 23 assists after he had 20 points in 47 games last season.

Chaussures Jordan
Guest

i was getting the same symptoms.– David Andreatta (@david_andreatta) “Some scary headlining – but 23 deaths, and Lack poke-checked the puck away from Brandon Saad. Versteeg opened the scoring at 7:49 on a deflection of Kane’s shot from just inside the right point.Remarkably,C.?That??s the way the world has worked since people first discovered the utility of information and the power of secrecy. having agreed verbally with the reporter that the conflict of interest in his department is egregious,What is the city’s most famous moment in football history? so no need to be worried about competition for attracting an NHL team.

James
Guest

Doctors that accept cash payments are likely to be popular in areas where costs of health care are high as well. This puts the money where it needs to go in more realistic quantity. Will that lower the costs in such a region, or will it drive some institutions to hike their prices further? Can we get a study on that?

bubbles
Guest
bubbles

My physician friend goes to 4 hospitals in the same region. At one, friend was criticized for ordering subcu heparin in a patient with a recently drained subdural hematoma and GI bleed, and yet, at another hospital, with a similarly at risk patient (IC Bleed and iron deficiency), there was repeated insistence (augmented by the EHR CDS) that heparin be used to prevent DVT is a 91 year old frail patient. Hello! Cultures are different in hospitals and when the blind lead the blind, variations occur and become ingrained. And when the blind are sitting on peer review committees, you… Read more »

Tom Leith
Guest
Tom Leith

Hmmm. How do the blind get onto peer review committees? Are the members elected by the local physicians? Appointed? Are they volunteers?

What would be the best way to ensure a quality peer review committee?

Bob Hertz
Guest

As Dr Reinhardt implies, part of the problem is that Medicare does not have a hard budget…i.e., when the annual allocation is spent, there is no more money available. Instead, Medicare is still an open-ended, claims-driven, self-reporting system with a highly graded and easily-manipulated fee schedule. If Medicare did have a hard budget, then payments could be ratcheted down right in the middle of a fiscal year, in a given state. If Florida was home to 7% of Medicare recipients, Florida would receive 7% of Medicare dollars. If total claims were running well above 7% in the middle of the… Read more »

Bimbo
Guest
Bimbo

It is as simple as “monkey see, monkey do”. The role of behemoth medical centers in the run up of costs and variation ought not be neglected.

Barry Carol
Guest
Barry Carol

Others have noted the significant differences in physician practice patterns from one state or region of the country to another. If it were up to me, I would attack this in two ways. First, I would publish lots of data by state and region covering such statistics as hospital inpatient bed days and ICU bed days per thousand Medicare beneficiaries, numbers of common surgical procedures like back surgeries, hip and knee replacements, CABG’s, stents, etc. per thousand Medicare members, skilled nursing facility bed days and home healthcare visits per thousand people and several others. Ensure that the mainstream media has… Read more »

Barry Carol
Guest
Barry Carol

This is a complex issue that probably calls for different strategies to approach different facets of the problem. For example, it’s easy to understand why hospitals want to expand in areas that are profitable and well reimbursed. This includes cardiac care and new treatments like proton beam therapy. As long as hospital Boards of Directors tie CEO and CFO incentive compensation largely to growth in revenue, profit and market share, this trend will persist. For priorities like cost-effectiveness, patient safety, adhering to evidence based guidelines and protocols and patient satisfaction to gain more traction, the metrics that drive senior management… Read more »