IOM cautions against geographic-based reimbursements

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Basing Medicare reimbursements on a geographic value index would likely "reward low-value providers in high-value regions and punish high-value providers in low-value regions," suggests preliminary research by an Institute of Medicine (IOM) study group.

A geographic value index would adjust payments to providers within a defined area based on aggregated spending and quality measures, but the preliminary IOM report found variations in healthcare spending and hospitals across both small and large regions.

The findings cast doubt on theories cited in the report that Medicare spending could be cut by nearly 30 percent if care practices in low-cost, high-quality regions were adopted nationwide.

The interim report from the Committee on Geographic Variation in Healthcare Spending and Promotion of High-Value Care found variations in costs among hospitals, physicians in the same practice, and among individual providers treating different conditions. Researchers also round inconsistent quality rankings and discrepancies in the relationship between utilization and quality.

As a result, there is little evidence that Medicare payment reforms in the Affordable Care Act would target decision making units at various provider levels, the report concluded.

However, the results "suggest that tying a decision-making unit's payment to its actions, as these reforms do, is preferable to induce desired changes in care," the report states. Reforms addressing efficiency and fraud in post-acute care, especially in home-health and skilled-nursing settings, could significantly improve healthcare efficiency.

A separate study published recently by BMJ found that regional differences in healthcare utilization lead to Medicare overpayments. The problem is a flawed risk-adjustment model that wrongly assumes areas with higher utilization rates have sicker patients, the study found. As a result, providers in some areas are overpaid while those in other areas are underpaid.

"Adjusting without correction for regional variation in visit rates tends to make regions with high rates of visits seem to have lower mortality and lower costs and vice versa," the researchers concluded. "Visit-corrected comorbidity measures better explain variation in age, sex, and race mortality than observed measures, and reduce observational intensity bias."

Another study, published in the Journal of the National Cancer Institute, revealed no direct link between higher Medicare regional spending on advanced cancer treatment and higher survival rates. Spending on advanced cancer treatments varied by as much as 41 percent, but higher spending appeared more associated with more frequent and longer hospital stays than with survivability.

To learn more:
- read or download the IOM report

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