RAND Corp. Study Finds Insurers' Efforts to Send Patients to Lower-Cost Physicians Misleading

A study into physician cost profiling, commonly used to decide which physicians are included in health plan networks, found that around 25 percent of physicians would be misclassified under systems currently used by plans to encourage patients to receive care from physicians with lower medical costs, according to a news release from the RAND Corp.

The RAND Corp.'s study, published in the March 18 issue of the New England Journal of Medicine, assessed 13,788 physicians in 28 specialties. Researchers found that only about 40 percent of physicians had cost profile scores that were at least 70 percent reliable — a common threshold for reliability — and fewer than 10 percent of physicians had cost profiles that were at least 90 percent reliable, according to the release.

The researchers also determined that among physicians in a "hypothetical two-tiered insurance plan," around 40 percent of internists and nearly 67 percent of vascular surgeons who were labeled as lower costs were not, in fact, lower cost physicians, according to the release. The study also found that surgical specialists seemed to have low reliability cost profile scores, whereas dermatologists' profile scores were most reliable.

The RAND researchers used information from insurance claims for 2004 and 2005 from four Massachusetts health plans, which provided coverage to about 80 percent of non-elderly patients with insurance, according to the release. Commercially available soft ware was used to examine the costs of treating common illnesses, which was then used to create a cost profile for individual physicians.

"Our findings raise questions about the utility of cost profiling tools for high-stakes activities such as tiered health plans and the likelihood that wide use of these strategies will reduce healthcare spending," said John L. Adams, the study's lead author and a senior statistician at RAND, a nonprofit research organization. "Consumers, physicians and those who pay for health care are all at risk of being misled by the results from these tools."

The result of such ranking systems are significant because health insurers have been limiting the number of physicians who have in-network contracts, leading to lower co-payments by patients for seeing preferred physicians, according to the report. The RAND study shows that the reliability of cost-profiling scores were unacceptably low for physicians in most of the specialty groups.

"These ranking systems may be useful for some purposes, but they are not reliable enough at this point to make decisions about encouraging patients to see certain providers or excluding some doctors from insurance networks," Mr. Adams said in the release. "Much work remains to be done to improve these systems before they are used for high-stakes activities."

Researchers concluded by saying rankings can still be useful for physicians in the higher cost regions, as they can use the data to re-evaluate their practices, according to the report. They also suggested that more robust tools need to be developed to provide more reliable cost profiles.

Read the RAND Corp.'s release on physician cost profile rankings.