Analysis of Medicare cost and utilization data has been extensively documented, most notably by the Dartmouth Atlas, and has revealed significant variation from one region to the next. Similar analysis using commercial insurance data, however, has been lacking. This study, the first to consider commercial populations, examines regional cost variation, providing cost relativities for claims paid by commercial payors for particular hospital referral regions. Among other findings, the study highlights the importance of negotiated provider reimbursement as a factor in the nation’s healthcare cost. While Medicare sets provider reimbursement rates based on formulas and rules, commercial provider reimbursement is set by negotiation between the insurer and the provider. This means, among other things, that regions with low Medicare costs could have high commercial costs. An examination of commercial data alongside Medicare data is crucial for understanding the true nature of healthcare cost variation across the country.
Cost
Bruce Pyenson, geographic cost disparity, Michele Berrios, Sara Goldberg
Last year, Miami was the first city analyzed in the Milliman Medical Index to surpass $20,000 in medical costs for the typical family. This year, New York and Chicago join the club. Here is the full breakdown:
Here’s a closer look at the city-by-city list:
Cost
Chicago, geographic cost disparity, Miami, Milliman Medical Index, New York
Negotiations between providers and insurers have significant healthcare cost implications–just look at California as an extreme example of this. And the variation is not just on a state-by-state basis. An article in today’s Dallas Morning News clarifies this dynamic:
Average health care costs for Texans with insurance are higher in two midsized markets — Lubbock and Tyler — than in the big urban centers, according to Houston actuary Tim Lee.
In Lubbock and Tyler, there are two dominant hospital systems “that can leverage higher fees” from insurance companies, said Lee, principal and consulting actuary with Milliman Inc., a large national actuarial firm. He spoke at a panel at an Association of Health Care Journalists meeting in Chicago.
In Dallas, Fort Worth, Houston and San Antonio, “they have more systems competing,” which drives down the prices that big hospital networks can negotiate with insurers, he said.
Cost
geographic cost disparity, Texas, Tim Lee
A recent study seeks out locations where hospitals are able to provide high value care to both Medicare and commercial patients. Here is an excerpt:
Many private payers are concerned that current government (Medicare and Medicaid) provider payments get translated into higher provider charges to commercial payers, which increases private payer premiums and claims costs for self-insured plans. This study was commissioned to look at actual data from commercial insurers to help answer this question:“Are cities that are high value for Medicare inpatient care also high value for private payers, or do they look better because private payers were charged more to enhance inpatient revenue?”
There are important policy implications, depending on which part of the question above is correct. It is important to reframe the high value definition as those cities and hospitals that provide the best inpatient hospital value for all payers, consumers and the community as a whole.
So where are the high value cities? Here is the list:
- Tucson, Ariz.
- Albuquerque, N.M.
- Sarasota, Fla.
- Akron, Ohio
- Honolulu, Hawaii
- Medford, Ore.
- Boise, Idaho
- Portland, Ore.
- Portland, Maine
- Pittsburgh, Pa.
- Grand Rapids, Mich.
- Knoxville, Tenn.
- Asheville, N.C.
- Newport News, Va.
- Fargo, N.D./Moorhead, Minn.
- Spokane, Wash.
Efficiency
Bruce Pyenson, cost shift, geographic cost disparity, NBGH
A study released yesterday provides perspective into the factors that may be leading to variation in value from one American city to another. As noted in Business Insurance, the variation does not correlate to a single factor:
Surprisingly, researchers said, the hospitals that provide high-value care to Medicare and commercial payers share no specific characteristics that separate them from those that provide low-value care to either Medicare, commercial payers or both, said Bruce Pyenson, a New York-based principal and consulting actuary at Milliman, during the news conference.
He said researchers found there is considerable variation among the hospitals studied in cost drivers including wages, payer and hospital competition, location, and ratio of primary care to specialist physicians.
However, researchers found that certain hospitals that provide good value for Medicare and commercial payers generally have greater medical efficiency and lower admission rates, Mr. Pyenson said.
So what could explain this variation? As Pyenson said during the press briefing for the new study, “Other factors are less important than management, than business decisions. I realize this may sound funny from an actuary. The point is that cost-shifting is not inevitable. We are not victims of our circumstance.”
Cost, Reform
Bruce Pyenson, cost shift, geographic cost disparity
In the latest chapter in the important coversation over the disparity in care cost from one geography to another, a new study released today looks at the question of whether certain cities are able to provide value both on Medicare and commercial business while also remaining profitable.
Cost, Efficiency
Bruce Pyenson, geographic cost disparity
Last night’s News Hour included an interview with doctor and essayist Atul Gawande.
He notes the disparities in American healthcare from one area to the next and calls for improvement in both quality and cost.
Cost, Quality of Care, Reform
Atul Gawande, Convergence, geographic cost disparity
This report from the Robert Wood Johnson Foundation looks at the cost implications for all 50 states if reform fails.
Note the variety of the results—yet another example of geographic cost disparity.
Cost
geographic cost disparity
An organization supported by the Robert Wood Johnson Foundation, State Coverage Initiatives (SCI), has issued a new paper, “Health care reform and American federalism: The next inter-governmental partnership.” SCI has also launched a blog called “Speaking of States.” Specifically, the SCI paper looks at the state-federal relationship as it pertains to Medicaid expansion, health insurance exchanges, and care management.
The paper raises some interesting points and puts us in mind of several considerations that we have previously blogged about:
The question of how federal and state governments might work better together in a reformed system will no doubt take on increased importance as the reform conversation continues.
Electronic Health Records, Exchanges, Regulation
co-op, federalism, geographic cost disparity
Did you know Miami-Dade County has two Gamma Knives, and will host a proton beam by 2012?
So reports an article just out from Forbes. The article looks both at the cost of care in Miami as well as some of the drivers. Quoting from the article:
Though Miami-Dade’s share of residents 65 and older accounts for 14% of the population, that doesn’t explain why it topped the institute’s list. An annual report by the actuarial and consulting firm Milliman found that Miami had the highest level of private sector medical spending among 14 major metro areas studied. According to the firm’s analysis, it costs $20,282 for a family of four covered by an employer-sponsored preferred provider organization (PPO) compared to a national average of $16,771.
Just yesterday we mentioned efforts to counter Florida’s healthcare costs with a new doctor model, one of several attempts to address some of the highest-cost care in the country.
For the national view on cost disparity, check out this new tool from the New York Times.
Cost, Milliman Medical Index
geographic cost disparity, Miami, Milliman Medical Index
Recent Comments