Regional Spending Variations Tied to Doctor Care Methods

A careful look at variations in Medicare spending growth and patterns across the country might hold one key to reining in the rapid growth of health care costs, according to an analysis by Dartmouth University researchers.

They looked at Miami, Dallas, and other cities that are experiencing much faster growth in costs than some cities. San Francisco and Pittsburgh, for example, seem to have attained sustainable growth rates and are able to build on successful models of delivery-system and payment reform.

The researchers ruled out two explanations: technology (residents of all U.S. regions have access to the same technology and it is doubtful that physicians in slow-growth regions are denying their patients needed care) and the current payment system.

They surmised that the causes lie in how physicians respond to the availability of technology, capital, and other resources in the context of the fee-for-service payment system.

Physicians in high- and low-spending regions were about equally likely to recommend specific clinical interventions when supporting evidence was strong. Those in the highestspending regions, however, were much more likely to recommend discretionary services, such as referral to a subspecialist for typical gastroesophageal reflux or stable angina.

Current payment methods encourage spending by expanding the services that doctors and hospitals provide.

Any attempt to control costs, according to Elliott S. Fisher, MD, professor of medicine and of community and family medicine at the Center for Health Policy Research at the Dartmouth Institute for Health Policy and Clinical Practice and one of the authors, needs to address how doctors and hospitals are paid.

The researchers propose that there is a need for policies that encourage high-growth (or high-cost) regions to behave more like low-growth, low-cost regions. To accomplish this, they propose fostering the growth of more organized systems of care and implementing fundamental payment reform.

Insurers could promote greater collaboration and offer incentives — such as larger payment updates or subsidies for implementing electronic health records — to providers willing to establish care systems. The current volume-based payment system could then be adapted to incorporate partial capitation, bundled payments, or shared savings.