Study: Population Health May Drive Geographic Variation in Medicare Costs

Population health, a centerpiece of healthcare reform, might drive geographic variation in Medicare costs per beneficiary, according to a new study from the Center for Studying Health System Change.

Previously, research has often identified communities as either high- or low-cost areas. Care was either deemed inefficient or efficient. Some research suggested Medicare could slash its spending by up to 30 percent if all providers followed the care patterns of low-cost areas.

This new research suggests patterns of geographic variation are more complex. Researchers analyzed 10 specific medical conditions, such as heart disease and bacterial lung infections, and they found the costs to treat an episode of each condition varied significantly among communities.

However, patterns of geographic cost variation were not consistent across conditions. Communities that were relatively expensive in the treatment of some conditions were inexpensive in the treatment of others.

Treatment patterns, such as the rate of hospitalizations, surgery or specialist involvement, were associated with geographic cost variation for episodes of care but not overall per-beneficiary costs in a particular community.

Also, areas with high overall costs had a greater prevalence of the 10 conditions studied, and patients with the conditions generally were more likely to have a greater number of other conditions than in areas with low overall costs.   

The study has implications for payment reform initiatives like accountable care organizations and patient-centered medical homes, as those models may need to adopt more flexible, rather than uniform, approaches to address local conditions and treatment patterns, according to a release from CSHSC.

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