Healthcare Business News

Latest CMS data drop shows regional variation in spending on inpatient, post-acute care

By Beth Kutscher
Posted: June 3, 2014 - 7:15 pm ET

The CMS' release of per capita spending for Medicare beneficiaries shows that some states, particularly in the South, Midwest and mid-Atlantic, are spending significantly more on inpatient and post-acute care than Northern and Western states.

The agency released the state-level Medicare payment data at this week's Health Datapalooza conference in Washington. It also updated its database of common inpatient and outpatient charges with 2012 numbers.

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Despite controversy over whether these wholesale prices are relevant to consumers—who typically pay either negotiated insurance rates or receive financial assistance—price transparency experts say the state-level data can be instructive.

“It's exciting that we're all having this national conversation about cost,” said Robin Gelburd, president of Fair Health, a not-for-profit organization that maintains a national database of healthcare claims. “It's like we're in a living laboratory as we speak.”

The CMS' data shows that the government spent an average of $8,973 per Medicare beneficiary in 2012.

Total per capita costs were highest in Louisiana (26% above average), Texas and Florida (both 20% above average). They were lowest in Wisconsin (14% below average) and Utah (10%).

For inpatient care, spending on Michigan beneficiaries was 13% above average—the highest in the country—while it was 15% below average in Wyoming. The differences were starkest for post-acute care. In Louisiana, total per capita costs for post-acute services were 74% above the national average while in Mississippi they were 14% below average.

Geographical variations in per capita spending can be attributed to a number of factors, experts say, including differences in where beneficiaries get care, technology, medical protocols, concentration of providers and cost of living.

Lifestyle and socio-economic differences could also explain why some states are spending significantly more than others as their residents age, Gelburd said. The CMS said it did not adjust the data for differences in beneficiaries' health status.

However, the agency did attempt to control for other factors, such as higher payments tied to local wages and compensating hospitals for the cost of training doctors.

The database includes per capita spending from 2008 to 2012. Most states remained consistent in their spending relative to the national average over the period.

The heat maps generated by numbers could drive the policy debate on national healthcare spending, Gelburd said.

Separately, the CMS' release of the 2012 chargemaster data continued to show wide variation not just across the country but from hospital to hospital. It also renewed the debate around whether and how consumers can use this information to make decisions about where to get treatment.

For hospitals with a complicated cost structure, like academic medical centers, “The fear is that this will sort of commoditize their services,” said Brian Sanderson, managing partner of healthcare services at consulting firm Crowe Horwath. “People don't necessarily understand clinically what's going on here. It creates this perception that they are pricing themselves beyond the market.”

Hospitals, meanwhile, continue to insist that the charges are only a wholesale price, the jumping-off point for negotiation. It's unclear, though, whether the release of the data is prompting hospitals to adjust those prices now that they're available for public consumption.

“I think it's a little early to see prices go down in general,” said Clayton Nicholas, vice president of strategy and marketing for Change Healthcare Corp., which provides price transparency tools to employers and health plans. “But as consumers start shopping around on value, you're going to see providers competing on that data.”

Follow Beth Kutscher on Twitter: @MHbkutscher

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