Drill deeper to uncover variation across geographic areas

March 1, 2011

Sometimes supply drives demand. That's one of the often cited conclusions reached by the Dartmouth Atlas Project focusing on supply-sensitive care.

Key Points

SOMETIMES SUPPLY drives demand. That's one of the often cited conclusions reached by the Dartmouth Atlas Project focusing on supply-sensitive care.

The supply of a specific health service or resource has a major influence on utilization rates among Medicare beneficiaries with severe chronic illnesses during the last two years of their lives, according to ongoing Dartmouth research. Removing differences in the price of healthcare services, severity of illness and overall quality from the equation, results show relative Medicare spending in a specific region is influenced by the availability of medical resources-higher hospital admissions correlated with a higher number of hospital beds.

A study of 1.6 million Medicare beneficiaries released last month by the Center for Studying Health System Change, however, indicates that patient health is the driver of spending variation, not supply. When patient-level data was considered, market factors were insignificant or weakly related to cost.

"Most variations in per capita spending for the Medicare population are due to the volume of services in different regions," says Elliott Fisher, MD, director, Population Health and Policy, the Dartmouth Institute of Health Policy and Clinical Practice. "While Medicare spending is affected by different prices for the same service and by differences in the severity of patients' morbidities, the Dartmouth Atlas shows that the utilization of supply-sensitive services for chronically ill patients varies tremendously across regions and is responsible for much of Medicare's spending. Two major components of spending are unit cost and volume, which can be managed by eliminating unnecessary care."

MORE OR LESS

Dr. Fisher emphasizes the need for more information, performance measurements, innovative payment systems and provider accountability. Regions with higher practice patterns do not necessarily produce better results, and it's a longstanding truth that more care and more expensive care is not necessarily better care.

A Dartmouth Atlas finding further attributes geographic variations to physician reimbursement and how care is organized. In interviewing physicians, Dr. Fisher found that most schedule office visits for minor patient concerns because only office visits are reimbursed. Other communication choices might be more efficient and less costly.

"National health plans should be able to reduce unwarranted variations from region to region through payment or incentives," says Jeffrey Rideout, MD, senior vice president, cost and care management and chief medical officer for TriZetto. "Part of the challenge, however, is frequently a lack of evidence-based standards of care. More typically, providers practice according to the standards established in their local communities."

The result of these variations is estimated at $600 billion to $800 billion of wasteful spending a year, according to TriZetto.