Patient preferences drive large portion of cost differential in Medicare

It's a well-known fact that healthcare spending by region can vary wildly, but a new study in Health Affairs tries to quantify the exact reasons for the variations.

The study, conducted by researchers at Stanford University, used 2005 Medicare data from each hospital referral region, 2006 data from the Dartmouth Atlas, income by zip codes, and detailed surveys of individual Medicare beneficiaries.

The researchers concluded that the supply of physicians and hospital beds contributed to 23 percent of the cost variation, health and income contributed to 12 percent, and patient preferences contributed to 5 percent. Altogether, the cost differential between the lowest-spending and highest-spending areas was $2,834 per patient.

Patients' desire to obtain swift medical care appeared to play a significant role in spending. Just under 58 percent of patients who live in the areas with the lowest levels of Medicare spending said they would want to see a doctor right away when they had a health problem. By comparison, more than 62 percent of patients who lived in higher-spending areas said they would see a doctor right away when they were sick. That additional preference translated to nearly $1,100 in spending. Patients who tended to worry more about their health than others did not contribute to additional costs.

The study suggested that patients use advance directives to reflect their preferences and potentially reduce unnecessary care, but also concluded that physician and hospital bed supply had a greater effect on spending than any other factor that was examined.

Other studies support this conclusion. For example, a 2012 study by the Center for Studying Health System Change and the National Institute for Health Care Reform concluded that about half of the regional cost variations for care was attributed to differences in the quantity of services provided, which is tied to the availability of provider capacity.

To learn more:
- read the Health Affairs study (subscription required)

 

Suggested Articles

A commonly used format for formulary submissions has been updated to enable drug companies to share information with payers on unapproved products.

NextGen Healthcare's Rusty Frantz sounded off about hospitals opposing proposed federal data-sharing rules while also sharing data with tech giants.

Welcome to this week's Chutes & Ladders, our roundup of hirings, firings and retirings throughout the industry.