July 8, 2013
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Previous research has often characterized communities simply as high- or low-cost areas with all care provided inefficiently or efficiently, respectively. Some have suggested that Medicare could reduce spending by as much as 30 percent without harming health if all providers adopted treatment patterns found in low-cost areas.
But the new Health Services Research study indicates that patterns of geographic variation “are far more complex than generally thought.” When 10 specific medical conditions, including heart disease and bacterial lung infections, were examined, researchers found that episode treatment costs varied a great deal across communities, but patterns of geographic cost variation were not consistent across conditions.
The study found that treatment patternsfor example, the rate of hospitalizations, surgery or specialist involvementare associated with geographic variation in the costs of treating episodes of specific conditions but not overall per-beneficiary costs in a particular community.
Instead, population health appears to be a much more important driver of overall per-beneficiary costs in local areas, according to the study by HSC Senior Fellow James D. Reschovsky, Ph.D., Jack Hadley, Ph.D., of George Mason University; James O’Malley, Ph.D., of Harvard Medical School; and Bruce E. Landon, M.D., M.B.A., M.Sc., of Harvard Medical School.
In areas with high overall costs, according to the study, the prevalence of the 10 conditions studied was higher, and patients with the conditions generally were more likely to have a greater number of other conditionsindicating they were sickerthan in areas with low overall costs.
“Although the cost of treating specific conditions varies considerably across areas, cost patterns in the treatment of specific conditions within areas were not very consistent, and were only weakly related to total costs in an area. Most communities were relatively expensive in the treatment of some conditions and inexpensive in the treatment of others,” the article states.
An implication of the results is that payment reform initiatives—such as patient-centered medical homes and accountable care organizationsaimed at improving both the quality and efficiency of care delivery may need flexible approaches to address local conditions and treatment patterns.
The study, titled “Geographic Variations in the Cost of Treating Condition-Specific Episodes of Care among Medicare Patients,” was based on an analysis of claims from 1.5 million elderly Medicare beneficiaries in 60 nationally representative communities and was funded by a National Institute on Aging grant to Harvard University.
The Center for Studying Health System Change is a nonpartisan policy research organization committed to providing objective and timely research on the nation's changing health system to help inform policy makers and contribute to better health care policy. HSC, based in Washington, D.C., is affiliated with Mathematica Policy Research.