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Comparing local and regional variation in health care spending.

ABSTRACT: Wide geographic variation in health care spending has generated both concern about inefficiency and policy debate about geographic-based payment reform. Evidence regarding variation has focused on hospital referral regions (HRRs), which incorporate numerous local hospital service areas (HSAs). If there is substantial variation across local areas within HRRs, then policies focusing on HRRs may be poorly targeted.Using prescription drug and medical claims data from a 5% random sample of Medicare beneficiaries from 2006 through 2009, we compared variation in health care spending and utilization among 306 HRRs and 3436 HSAs. We adjusted for beneficiary-level demographic characteristics, insurance status, and clinical characteristics.There was substantial local variation in health care (drug and nondrug) utilization and spending. Furthermore, many of the low-spending HSAs were located in high-spending HRRs, and many of the high-spending HSAs were in low-spending HRRs. For drug spending, only 50.7% of the HSAs located within the borders of the highest-spending quintile of HRRs were in the highest-spending quintile of HSAs; conversely, only 51.5% of the highest-spending HSAs were located within the borders of the highest-spending HRRs. Similar patterns were observed for nondrug spending.The effectiveness of payment reforms in reducing overutilization while maintaining access to high-quality care depends on the effectiveness of targeting. Our analysis suggests that HRR-based policies may be too crudely targeted to promote the best use of health care resources. (Funded by the Institute of Medicine and others.).

SUBMITTER: Zhang Y

PROVIDER: S-EPMC3490218 | biostudies-literature | 2012 Nov

REPOSITORIES: biostudies-literature

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Comparing local and regional variation in health care spending.

Zhang Yuting Y Baik Seo Hyon SH Fendrick A Mark AM Baicker Katherine K

The New England journal of medicine 20121101 18

<h4>Background</h4>Wide geographic variation in health care spending has generated both concern about inefficiency and policy debate about geographic-based payment reform. Evidence regarding variation has focused on hospital referral regions (HRRs), which incorporate numerous local hospital service areas (HSAs). If there is substantial variation across local areas within HRRs, then policies focusing on HRRs may be poorly targeted.<h4>Methods</h4>Using prescription drug and medical claims data fr ...[more]

PMID: 23113483

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Project description:BackgroundSources of regional variation in spending for prescription drugs under Medicare Part D are poorly understood, and such variation may reflect differences in health status, use of effective treatments, or selection of branded drugs over lower-cost generics.MethodsWe analyzed 2008 Medicare data for 4.7 million beneficiaries for prescription-drug use and expenditures overall and in three drug categories: angiotensin-converting-enzyme (ACE) inhibitors and angiotensin-receptor blockers (ARBs), 3-hydroxy-3-methylglutaryl coenzyme A (HMG-CoA) reductase inhibitors (statins), and selective serotonin-reuptake inhibitors (SSRIs) and serotonin-norepinephrine reuptake inhibitors (SNRIs). Differences in per capita expenditures across hospital-referral regions (HRRs) were decomposed into annual prescription volume and cost per prescription. The ratio of prescriptions filled as branded drugs to all prescriptions filled was calculated. We adjusted all measures for demographic, socioeconomic, and health-status differences.ResultsMean adjusted per capita pharmaceutical spending ranged from $2,413 in the lowest to $3,008 in the highest quintile of HRRs. Most (75.9%) of that difference was attributable to the cost per prescription ($53 vs. $63). Regional differences in cost per prescription explained 87.5% of expenditure variation for ACE inhibitors and ARBs and 56.3% for statins but only 36.1% for SSRIs and SNRIs. The ratio of branded-drug to total prescriptions, which correlated highly with cost per prescription, ranged across HRRs from 0.24 to 0.45 overall and from 0.24 to 0.55 for ACE inhibitors and ARBs, 0.29 to 0.60 for statins, and 0.15 to 0.51 for SSRIs and SNRIs.ConclusionsRegional variation in Medicare Part D spending results largely from differences in the cost of drugs selected rather than prescription volume. A reduction in branded-drug use in some regions through modification of Part D plan benefits might lower costs without reducing quality of care. (Funded by the National Institute on Aging and others.).

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Comparing local and regional variation in health care spending.

Publications

Comparing local and regional variation in health care spending.

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