Geographic VariationGeographic Variationin Health Carein Health Care

Presentation for:

IOM Panel on Geographic Variation in Healthcare Spending and Promotion of

High-Value Care

Michael Chernew

Practice patterns vary widely for similar patientsPractice patterns vary widely for similar patients

Source: Wennberg and Gittelsohn, 1973. Science 183(4117): 1102-1108.

Surgical ProcedureSurgical Procedure Lowest Two Lowest Two AreasAreas

Entire Entire StateState

Highest Two Highest Two AreasAreas

TonsillectomyTonsillectomy 1313 3232 4343 8585 151151

AppendectomyAppendectomy 1010 1515 1818 2727 3232

Males Males

ProstatectomyProstatectomy 1111 1313 2020 2828 3838

FemalesFemales

CholecystectomyCholecystectomy 1717 1919 2727 4646 5757

HysterectomyHysterectomy 2020 2222 3030 3434 6060

MastectomyMastectomy 1212 1414 1818 2828 3333

Number of Procedures per 10,000 for 13 Vermont hospital service areas, 1969

Voluminous literature Voluminous literature

4x variation in cesarean delivery (Baicker 4x variation in cesarean delivery (Baicker et al 2006)et al 2006)

1.6x variation in antibiotic fills PMPY, 51.6x variation in antibiotic fills PMPY, 5thth--9595thth percentile (Steinman 2009) percentile (Steinman 2009)

13.5x variation in odds ratio for type of 13.5x variation in odds ratio for type of vascular access for dialysis patients (Hirth vascular access for dialysis patients (Hirth et al 1996)et al 1996)

Variation in spending as well as in useVariation in spending as well as in use

Source: Fisher et al, 2009

Why is this important?Why is this important?

Changes beliefs away from notion that Changes beliefs away from notion that physicians are always rightphysicians are always right– Weakens notion that practice of medicine is purely Weakens notion that practice of medicine is purely

sciencescience

Quantifies potential waste in the systemQuantifies potential waste in the system– Not sure how to best get rid of ‘waste’Not sure how to best get rid of ‘waste’

Translating the population based results to the bedside is Translating the population based results to the bedside is hardhard

Helps identify ‘efficient’ marketsHelps identify ‘efficient’ markets– Is Minneapolis more efficient than Miami?Is Minneapolis more efficient than Miami?

Explaining variationExplaining variationExplanations that generate concern

Explanations that we typically accept

Explanations withuncertain implications

• Health Status

• Health behaviors

• Patient Preferences

• Input Prices

• Physician supply

• Infrastructure

• Insurance

• Output prices

• Beliefs

• Greed

• Culture

• Income

• Cost shifting

Empirical implicationsEmpirical implications

SpendingSpendingimim = X = Xii**11 + Z + Zimim * *22 + M + Mmm + + ii

MMmm denotes mean spending at the market denotes mean spending at the market level after adjusting for personal traits (X) level after adjusting for personal traits (X) and market traits (Z)and market traits (Z)

Adding X’s and Z’s will shrink variation in Adding X’s and Z’s will shrink variation in M’s if:M’s if:X or Z affects spending AND varies across X or Z affects spending AND varies across

marketsmarkets

Health statusHealth status

Clearly important at individual levelClearly important at individual level

Varies across markets (implying important Varies across markets (implying important at market level)at market level)

Hard to measureHard to measure

Conceptually circularConceptually circular– If more treatment improves health, areas with If more treatment improves health, areas with

aggressive practice styles will seem healthieraggressive practice styles will seem healthier

Controversy in measuring health Controversy in measuring health statusstatus

More aggressive places code more illness, so More aggressive places code more illness, so populations appear ‘sicker’populations appear ‘sicker’– Are they really sicker or do they just code more?Are they really sicker or do they just code more?– If just coding, the health status adjustments ‘over’ If just coding, the health status adjustments ‘over’

adjust.adjust.

People who move have ‘increases’ in measured People who move have ‘increases’ in measured illnessillness– Moving to area with 1 quartile higher spending Moving to area with 1 quartile higher spending

associated with a 5.9% increase in HCC score (Song associated with a 5.9% increase in HCC score (Song et al, 2010)et al, 2010)

Other approaches to health status Other approaches to health status adjustmentsadjustments

Look at specific diseasesLook at specific diseases

Examine end of lifeExamine end of life

Variation in price adjusted spending by Medicare beneficiaries.

Source, Sutherland et al. 2010, NEJM

SES mattersSES matters

50% of variation in discharges explained 50% of variation in discharges explained by SES, crude health status measures, by SES, crude health status measures, and physician supply measuresand physician supply measures– Robust by area definition (county vs health Robust by area definition (county vs health

care market)care market)– Robust to methodsRobust to methods

Source: McLaughlin et al, 1989McLaughlin et al, 1989

Physician Composition and SpendingPhysician Composition and Spending

Source: Chernew et al, 2009

What do we get for extra spending What do we get for extra spending

Source: Baicker and Chandra, Health Affairs (April 2004)

LimitationsLimitations

Tendency for Medicare focusTendency for Medicare focus– Cost shiftingCost shifting– Erroneous inference about areasErroneous inference about areas– Salience of LTC services and maybe fraudSalience of LTC services and maybe fraud

Uncertain policy solutionsUncertain policy solutions– Area focus obscures within area provider Area focus obscures within area provider

heterogeneityheterogeneity

Commercial vs. MedicareCommercial vs. MedicareCorrelation

Level Level

(2006)(2006)

GrowthGrowth

1996 - 20061996 - 2006

Hospital and Hospital and Physician Physician Reimbursements Reimbursements (2006)(2006)

-.17-.17

(p<0.01)(p<0.01)

.20.20

(p<.01)(p<.01)

Per Capita Inpatient Per Capita Inpatient Days (2004)Days (2004)

0.590.59

(p<.01)(p<.01)

.13.13

(P<.01)(P<.01)

Source: Chernew et al, 2010

Concentration and spendingConcentration and spending

 Population

Hospital Concentration

Top third Commercial spending markets, 2006

600,145 0.434

Bottom third commercial spending markets, 2006

1,081,223 0.312

Top third Medicare spending markets, 2006

1,365,559 0.240

Bottom third Medicare spending markets, 2006

603,580 0.464

Source: Chernew et al, 2010

Provider variation more complexProvider variation more complex

Selection issues more salientSelection issues more salient– Health status adjustments difficultHealth status adjustments difficult

Attribution issues are complexAttribution issues are complex