In the latest data released from the Health Care Cost Institute’s (HCCI) Healthy Marketplace Index, an analysis of more than 1.8 billion claims shows wide variation when it comes to medical spending and frequency of services depending on the region of the country.
The report looks at services between the years 2012 and 2016 and cost per transaction. The results—across 43 states and 112 local areas—reveal that spending varied greatly across metro areas. Results also differed when segmented by inpatient, outpatient and physician services, and when comparing for service utilization.
"To us, the most interesting finding was just the extent of variation—not only in how much the same services cost or were used in areas across the country, but also in how price and use compared within metros," Bill Johnson, Ph.D., a senior researcher with HCCI, told FierceHealthcare. "There were plenty of examples where you could find two metro areas where prices were essentially the same. For example Oxnard, California, and New Haven, Connecticut—New Haven used almost 50% more services."
"What this variation suggests is that there is really a different story explaining healthcare costs almost everywhere you look," Johnson said.
Price and use levels were not necessarily connected, according to the study. For example, San Francisco ranked as having the third-highest overall price levels yet was well below the average use levels (22% lower).
While prices were a bit scattered, seven metro areas had prices more than 25% above or below the national median and 15 metro areas had use levels that were more than 25% above or below the median. Prices were highest in San Jose, California, and Anchorage, Alaska, both more than 15% higher than the next closest metro area, San Francisco. And both cities were more than 46% higher than the fourth highest metro area, Milwaukee.
Of course, there were some exceptions, such as New York City and New Haven, Connecticut. Price and usage in New York City were 22% and 26% above the national median, and New Haven was 18% and 13% above the national medians for price and usage.
On the opposite end of the spectrum were metro areas with low price levels but high use levels. For example, Toledo, Ohio, had a price level 17% below median but a use level more than 28% above median.
For those metro areas outside the median for use, levels tended to be lower. For example, Riverside, California, used 25% fewer services than Appleton, Wisconsin, and 36% less than Trenton, New Jersey. On the whole, metro areas with higher use tended to have lower prices and areas with higher prices tended to have lower usage.
So, what is impacting these patterns? Differences could be attributed to demand for services, supply of providers or even health characteristics of the population, states the report.
The report also looked at price versus use levels in 2016 as compared to 2012. It seems that the median growth of price over the four years was up 13%, but usage for services was down 17%. Prices increased in all metros but Durham, North Carolina, and usage decreased in all but three areas: Roanoke, Virginia, Salt Lake City, and Toledo.
Specifically looking at services, inpatient services seemed to have the biggest jumps in both cost and decrease in usage. For example, in Anchorage, price of inpatient services jumped 39% over the period of time, yet usage dropped by 27%. Outpatient services showed even more dramatic changes. In Beaumont-Port Arthur, Texas, prices of outpatient services shot up 44%, and as a result, usage dropped 22%. And although prices in Peoria, Illinois, only went up 18%, the usage of outpatient services went down 47%.
And while prices did go up for private professional services and usage dropped, the changes were not quite as dramatic. Most metro areas saw prices rise less than 15%, and almost all metro areas had a less than 30% drop in services.
"Generally, professional service prices grew slower than inpatient and outpatient prices, while use of professional services declined relatively less than the other two categories as well," Kevin Kennedy, a researcher at HCCI, told FierceHealthcare.
The first part of this HCCI report was released late in 2018 and focused on the notable differences in cost and cost growth for specific medical procedures. For example, prices for physician services or ambulatory care in Green Bay, Wisconsin, were 43% above the national average, while prices for inpatient, 16%, and outpatient care, 7%, were below the national average.
"We see declines in overall service use in almost all metros, but these overall trends are the product of different trends across service categories," Johnson said. "When we look at outpatient services, for example, there are a number of metros where use actually increased. The same is true for both inpatient and professional services."
Kennedy points out several important takeaways from the data, including the importance of price as a first step in assessing how commercial healthcare markets are functioning.
"I think the best way to interpret the data is that it is a resource that local stakeholders can use to benchmark how their healthcare markets are functioning relative to others around the country—and how that’s changed over time," Kennedy added.