Variation in Health Care Spending: It’s Real, and Health Care Providers Should Be the Focus, in Bloomberg BNA’s Health Law Reporter

Doug Hastings, Chair of the firm's Board of Directors and a Member of the Firm in the Health Care and Life Sciences practice, in the Washington, DC, office, wrote an article titled "Variation in Health Care Spending: It's Real, and Health Care Providers Should Be the Focus."

Following is an excerpt:

It has been well reported by BNA and others that the Institute of Medicine, after a lengthy study, recently rejected the notion of basing Medicare payments on geographic area performance, or what has been termed a geographic value index. The principal reason for this conclusion is the evidence showing that substantial variation in spending and utilization remains as units of analysis get progressively smaller. In other words, there is as much variation within geographic units as between them. Thus, adjusting payments geographically, based on aggregate or composite measures of spending or quality, would unfairly reward low-value providers in high-value regions and punish high-value providers in low-value regions. What the IOM committee instead suggests is that the focus for payment reform should squarely be on health care providers and delivery systems.

This new IOM report adds yet another strong voice, backed by extensive research, in support of the ongoing efforts across health care to increase coordination and accountability and decrease fragmentation and variation.

Variation Is Real, Even After Adjusting for Acceptable Factors

''Geographic variation in spending and utilization is real, and not an artifact reflecting random noise. The committee's empirical analyses of Medicare and commercial data confirm the robust presence of variation, which persists across geographic units and health care services over time." This initial conclusion of the study validates years of prior findings by Dartmouth researchers and by the Medicare Payment Advisory Commission. Thus, notwithstanding the IOM's rejection of a geographic value index, efforts to reduce variation and to lower payments to high cost providers clearly will continue.

Reproduced with permission from BNA's Health Law Reporter, 22 HLR 1245, 8/15/13. Copyright © 2013 by The Bureau of National Affairs, Inc. (800-372-1033)