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IOM Confirms Geographic Variation in Health Spending

Geographically-based value index unlikely to be beneficial; decision making occurs at individual level
THURSDAY, July 25 (HealthDay News) -- Considerable geographic variation exists in health care spending and utilization, but a geographically-based value index is unlikely to promote value improvement, according to a report published July 24 by the Institute of Medicine.
Joseph P. Newhouse, Ph.D., from the Harvard School of Public Health in Boston, and colleagues examined the geographic variation in health care spending levels and growth among Medicare, Medicaid, and privately insured populations in the United States.
According to the report, geographic variation exists in spending and utilization, and persists across geographic units and health care services, and over time. In the commercial insurance market, variation in spending is mainly due to differences in provider price markups rather than differences in health care service utilization. Geographic variation in spending in Medicare and private insurance is not explained by beneficiary demographic factors, insurance plan factors, or market-level characteristics, after adjustment for age, sex, and health status of beneficiaries. Much of the variation remains unexplained even after adjustment for all measurable factors. Since health care decision making usually occurs at the level of the individual practitioner or organization, rather than the geographic region, a geographically-based value index is unlikely to promote more efficient behaviors or improve the value of health care. The report presents recommendations for promoting delivery of high-value care.
"Congress should not adopt a geographically-based value index for Medicare," the authors write. "Adjusting payments geographically, based on any aggregate or composite measure of spending or quality, would unfairly reward low-value providers in high-value regions and punish high-value providers in low-value regions."
More Information (http://www.iom.edu/Reports/2013/Variation-in-Health-Care-Spending-Target-Decision-Making-Not-Geography.aspx )
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