Comparing Local and Regional Variation in Health Care Spending

Abstract

Background Wide geographic variation in healthcare spending has generated concern about inefficiency and policy debate about geographic-based payment reform. Evidence on 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. Methods Using pharmacy and medical claims data from a 5% random sample of Medicare beneficiaries in 2006–2009, we compared variation in health care spending and utilization in 306 HRRs and 3436 HSAs. We adjusted for beneficiary-level demographics, insurance status, and clinical characteristics to calculate adjusted use and spending. Results There is substantial local variation in drug and non-drug utilization and spending, and substantial dispersion of local areas within HRRs; many low-spending HSAs are located within the borders of high-spending HRRs and vice versa. Only about half of the HSAs located within the borders of the highest spending quintile of HRRs are in the highest spending quintile of HSAs; conversely, only about half of the highest spending HSAs are located within the borders of the highest-spending HRRs. Conclusions The effectiveness of payment reforms in reducing overutilization while maintaining access to high-quality care depends crucially on the effectiveness of targeting. Our analysis suggests that HRR-based policies may be too crudely targeted to promote the best use of healthcare resources.

Geographic Variations in Use of Medicaid Mental Health Services

“…How large were these variations? A recent study of hospital service area-level variations in service use that analyzed 2007-2009 Medicare data found much less variation than we did; coefficients of variation were .09, .20, and .18 for monthly prescription fills, annual inpatient admissions, and annual outpatient office visits, respectively (9). That study is not directly comparable because we focused on mental health services for disabled Medicaid recipients with mental disorders and that study focused on health services for all Medicare recipients.…”

Multiple Comparisons in Variation of Care Research

“…For instance, Zhang et al examined variation across 3,436 hospital service areas (HSAs) in the United States. They found that the highest spending HSAs were only loosely correlated with high spending HRRs [1]. These results suggest that targeting variation by HRR is neither a sensitive nor specific strategy to identify the source of unwarranted practice [1].…”

“…A PubMed search for "variation in care" yields over 23,000 entries (July 8,2013), and the same terms generate over 2 million results on Google Scholar (July 8, 2013). The seminal illustration of variation research, the Dartmouth Health Atlas, describes variation across 306 hospital referral regions (HRRs) in the United States [1].…”

“…They found that the highest spending HSAs were only loosely correlated with high spending HRRs [1]. These results suggest that targeting variation by HRR is neither a sensitive nor specific strategy to identify the source of unwarranted practice [1]. Other research efforts have examined variation based on race, physician specialty, individual physicians, individual hospitals, patient age, other patient characteristics, countries, states, cities, neighbourhoods, and more.…”

Evaluating and re-demarcating the Hospital Service Areas in Florida

“…The HRRs have not yet been suggested to be as useful for revealing substantial variation at local levels (Ashton et al, 1999;Zhang, Baik, Fendrick, & Baicker, 2012). However, the widely used HSAs in the U.S. were based on the 1992e93 data two decades ago (Center for Evaluative Clinical Sciences, 1999).…”