Monday, March 25, 2013

Fwd: qotd: Can we recover waste by identifying geographic variations in health care?

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-------- Original Message --------
Subject: qotd: Can we recover waste by identifying geographic
variations in health care?
Date: Mon, 25 Mar 2013 12:10:23 -0700
From: Don McCanne <>
To: Quote-of-the-Day <>

The National Academies
Institute of Medicine
Interim Report of the Committee on Geographic Variation in Health Care
Spending and Promotion of High-Value Health Care: Preliminary Committee
Observations (2013)

A geographic value index would adjust payment to all providers within a
defined area based on aggregate measures of spending and quality. The
committee sought to determine empirically whether providers within a
defined area behave similarly (e.g., exhibit similar patterns of service
use across sub-regions, clinical conditions and quality measures).
Consistent with a body of literature, analyses commissioned by the
committee observed variation in health care spending at every geographic
level (Hospital Referral Regions, Hospital Service Areas, Metropolitan
Statistical Areas) studied, and additional research found variation
among hospitals within Hospital Referral Regions, among physicians in
the same group practice, and even within individual providers when
treating different conditions. Further, Hospital Referral Regions do not
consistently rank high or low across quality measures, nor is there a
consistent relationship between utilization and various quality
measures. These preliminary observations suggest that a geographic value
index would reward low-value providers in high-value regions and punish
high-value providers in low-value regions.

Health policy leaders suggest that, to improve value, payment reforms
need to create incentives to encourage behavioral change in the locus of
care (provider and patient), and thus payment should target
decision-making units, whether they be at the level of the individual
providers, hospitals, health care systems, or stakeholder
collaboratives. Payment reforms contained in the ACA (e.g., value-based
purchasing, accountable care organizations, bundled payments) and being
tested in the commercial market and Medicaid, do target decision makers
rather than geographic areas. Because these reforms are relatively new,
there is little evidence to date about their effects on the value of
care. Nevertheless, the results of the subcontractors' work for this
study suggest that tying a decision-making unit's payment to its
actions, as these reforms do, is preferable to induce desired changes in
care. Further, because post-acute care, particularly home health and
skilled nursing, is a major source of unexplained variation in Medicare
spending, reforms that address incentives to overuse post-acute care,
including fraud in that use, could have a large impact on health care

Comment: Health care spending tends to fall under a Bell curve. Most of
it falls in the middle, but some falls under the low end (low-cost) and
some falls under the high end (high-cost). The Dartmouth studies have
confirmed the geographical nature of this distribution. Thus much
attention has been directed to devising methods of recovering the
allegedly excessive spending in the high-cost regions. This report casts
doubt that such an effort would be productive.

To begin with, the Bell curve or Gaussian distribution (normal
distribution) is to be expected even when resources are being used
properly. Further, this variation is found not only between geographic
regions, but also between hospitals within the same regions, between
physicians within the same group practices, and even by the same
physicians managing different conditions. Thus measures designed to
reduce spending only in geographical regions at the high end will be too
blunt because they would reduce not only high-cost care of lower value,
but they also would reduce legitimately high-cost care that is providing
full value.

The authors of this Institute of Medicine report suggest that payment
reforms instead should target decision makers rather than geographical
areas. The decision makers include individual providers, hospitals,
health care systems, and stakeholder collaboratives. Health payment
reforms of the Affordable Care Act are designed to do just that. These
include measures such as accountable care organizations, value-based
purchasing, and bundled payments. Of course, adjusting payments based on
these and similar reforms are much more complex administratively than
merely adjusting payments based on regional spending levels.

It is questionable as to whether or not such payment systems could ever
be effective in significantly improving value in the entire health care
system since most impacts of the payment models are effective only at
the margin, if even there. Further, Gaussian distributions would apply
to these new models as well, making it likely that payment adjustments
would be inappropriate for some, even if appropriate for others.

Think of the Bell curve again, but for decision makers rather than
geographical regions. Many have suggested that 30 percent of health care
represents wasteful spending. What if you lop off the upper 30 percent
of care under the Bell curve? First you have to believe that you can
identify low-value care in advance - a highly unlikely scenario. Then
you have to assume that all care in the lower 70 percent provides value
whereas that in the upper 30 percent does not - a preposterous assumption.

What about the lower 30 percent of the curve. Does it really represent
high-value, low-cost care? Or does it represent care that is not being
delivered (and therefore not measured), even if it should be. Shouldn't
we be directing more efforts to be sure that we are meeting patient
needs, even if it could increase health care spending?

We are looking for ways to slow down the outrageous increases in
spending for what is often mediocre care. These feeble measures that are
designed to tweak decision makers are complex and likely will cost as
much to administer as any meager savings that they could realize. Some
of the ideas may be worth pursuing, such as value-based purchasing, but
we should not deceive ourselves that these are the grand solutions for
our excessive spending.

All other wealthy nations provide care for everyone at much lower costs,
and they have done it without playing these pseudo-wonk policy games. We
can't rely on silly, little tweaks. We need fundamental reform of our
health care financing system. We need a single payer national health

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