With evidence piling up that Medicare pro-viders in some parts of the country are providing excessive care to the federal program's beneficiaries, it appears more likely that Congress is going to take some type of action to try to rein in spending in those regions.
Here there and everywhere
With the release of MedPAC report on differences in regional Medicare spending, some providers are concerned government might overreact
The latest to weigh in on the subject is the Medicare Payment Advisory Commission, which issued a report last week that points to some wide differences in Medicare service use. Stating that the regional variation in service use was not as wide as the regional variation in Medicare spending, MedPAC said the difference is still “substantial.” The report notes that service use in higher-use areas—those in the 90th percentile—is about 30% greater than in lower-use areas, those in the 10th percentile.
MedPAC acknowledged that Medicare spending can vary because of a variety of factors, such as the wage index and health provider shortage payments. However, “appropriate levels of those payment factors are separate issues that deserve consideration in their own right,” its recent report stated, a phrase that hospital executives dread to hear.
Seeing the writing on the wall in various reform provisions on Capitol Hill, some hospital executives are worried that lawmakers—in an effort to weed out providers who may be getting paid too much or ordering too many tests—will end up creating a system that is more punitive in nature, instead of re-basing payments in a manner that reflects best clinical outcomes.
If lawmakers move to revamp the payment system based on what MedPAC's or similar economic analyses say, “My fear is it will be an irrational correction,” said Steve Landgarten, chief medical officer of eight-hospital Ardent Health Services, headquartered in Nashville. “This is all part of the issue of healthcare reform and how we're going to pay for healthcare reform,” said Landgarten, who is based in Tulsa, Okla.
Indeed, lawmakers are homing in on regional variations in spending, prices and service use trends in an effort to tamp down on out-of-control costs, particularly in Medicare, according to industry experts. “Regional variation and healthcare spending have long been documented, but these issues have come to the forefront as we look to reform the healthcare system and improve quality and efficiency,” said Caroline Steinberg, vice president for trends analysis with the American Hospital Association.
Other influential groups also are watching. Moody's Investors Service warned in a recent report on the topic that in attempting to minimize variation in healthcare costs among regions, some hospitals are certain to experience cuts to their Medicare payments.
The impetus for the broader interest in regional differences was a June 1 article in the New Yorker by surgeon and author Atul Gawande. He found that higher spending areas weren't necessarily delivering the best care, debunking the claim that patients get what they pay for. In particular, he explored the reasons why Medicare spends twice the national average per enrollee in McAllen, Texas—one of the most expensive healthcare markets in the country—than in other comparable markets, even though the quality of care there has been under scrutiny (Nov. 9, p. 12).
Some have compared McAllen with areas in Wisconsin and Minnesota, where providers are paid less to take care of Medicare patients, but do so with fewer services that yield higher-quality results. “You have to wonder why everyone can't do this,” said David Kendall, senior fellow for health and fiscal policy with Third Way, a moderate think tank based in Washington.
And that's what Congress, the Obama administration and other healthcare experts inside the Beltway are trying to figure out, so they can respond accordingly by better tailoring the way Medicare pays providers.
Healthcare reform legislation in the House deals with this issue head-on, containing several provisions to study, and then revise, the Medicare reimbursement system. Under these provisions, the Institute of Medicine would be called upon to conduct two studies, one of which aims to update Medicare's reimbursement formula to eliminate geographic disparities. The second study, which would take place over two years and be subject to congressional review, would take measures to re-base Medicare payment on quality of care rather than volume.
The Senate bill additionally contains provisions to address regional variation in payment, but those provisions are more specific to physicians, said Brent Miller, director of federal government relations with the Marshfield (Wis.) Clinic. Specifically, the Senate language includes provisions to look at value in healthcare by measuring quality and cost of services, and would require the CMS “to review its formulas for measuring costs and provide immediate relief in areas where physician compensation has been inadequate,” Miller said.
MedPAC's report, Measuring Regional Variation in Service Use, essentially “reinforces the fact there's little accountability for costs and quality in our healthcare system,” and that hospitals and doctors will be pressed by policymakers to improve quality of care while restraining costs, Kendall said.
“Service use” refers to how many services a Medicare beneficiary uses, such as hospital stays or physician visits, and how resource-intensive those services are. For example, X-rays use fewer resources than a CT scan. The report found that substantial variation exists between high and low per-beneficiary spending areas—a 50% difference between the highest 10% and the lowest 10% of areas. However, when Medicare spending figures were readjusted to reflect just service use, the gap between high and low spending areas shrunk to about 30%.
This indicates that Medicare's highest spending areas don't necessarily use the most services and the most resource-intensive services, according to the report.
Overall, the report's findings show an overall trend toward conservative care rather than excess use of services, said J.B. Silvers, a professor of health-system management at Case Western Reserve University in Cleveland. “The fact is that 39 areas are at or above 110% of the national average while 110 are at or below 90% of the average,” Silver said, in reference to the metropolitan statistical areas analyzed in the MedPAC report.
Nevertheless, MedPAC's report is bound to shape the healthcare debate by inciting advocates of payment differentials to “punish” high-utilization areas and “reward” more conservative-use areas, Silvers said. “Of course, using this blunt instrument may not change behavior in these places as much as save money for the feds. But it may make (lawmakers) feel better that something is being done about the McAllen, Texases of the world,” he said.
MedPAC did identify areas of excess, however. “Some areas of the country even within a given county, hospital or specialist are using more services than their colleagues—and not because their patients are sicker,” Kendall said. This questions whether patients are actually getting more for those extra services, he said.
In looking at the data, many of the worst offenders in excessive utilization appear to be in the Deep South, Silvers said. “Of the best performing, those with service use at 90% or less of the national average, all of these—except three in Georgia—are spread across the United States outside of the Old South.”
Utilization of services is difficult to analyze, however, Silvers said. “They're driven by a complex set of factors centering largely on physician practice patterns, rather than hospitals. However, these preferences and patterns of physicians are shaped by many other things” that are often not easily explained, he said.
Some providers are supportive of the fact that Congress and MedPAC are taking the time to study these variations in spending and service use. The MedPAC study “compels us to ask why the variation is occurring and what steps can be taken now to rein in the variation where it is unjustified,” said Karl Ulrich, president and CEO of the Marshfield Clinic, in an e-mail.
Ulrich added that he was pleased the House and Senate reform legislation included language “to understand and address the variation in health service utilization.”
Others claim they feel helpless in the wake of possible drastic actions to level the playing field. “As we in rural America go about the business of trying to plan for the future of taking care of the patients we serve, we find ourselves in the predicament of not having a clue as to what the federal government, the White House, Congress, the Senate, its consultants, its actuaries, or its many other healthcare experts will do,” said John Johnson, CEO of 12-bed Gothenburg (Neb.) Memorial Hospital.
For this reason, “this is without a doubt one of the scariest times I have ever seen,” said Johnson, who has been in the healthcare field for 43 years. “Most of these experts just can't seem to see the forest through the trees, and my fear is that we are headed for a big mistake that will then become unfixable.”
Given the opportunity of improving the healthcare delivery system, Johnson said he wouldn't look to a single report “or even numerous reports provided to me solely by agencies or companies from the inner healthcare circle. I would look around the globe at who does it best, how they do it and then pick and choose the best parts of those delivery systems to attempt structuring a better delivery system in our country.”
Ardent's Landgarten said the most rational approach would be to have a reimbursement system that appropriately rewards providers that offer efficient and effective care. “Those that use the fewest resources to achieve the best clinical outcome should be rewarded. Those who fail to achieve best possible outcomes and are inefficient in use of resources—they cost more yet their outcomes aren't as good—should not be rewarded,” he said. As an example, a provider who orders six X-rays may get paid for those services, but the outcome for the patient might not be better, he said.
A new reimbursement system should be based in part on national, evidence-based practice guidelines instead of pecuniary interests, and on comparative-effectiveness research, Landgarten said. “Let's find out what medicines and which diagnostic tests and procedures work most effectively and work with those, and reimburse based on those best practices and on evidence-based, clinical practice guidelines.”
The AHA has convened a task force to examine geographic variation in spending. The AHA found the MedPAC report helpful in “evaluating ways to get at this issue,” Steinberg said. With so many factors driving regional variation in spending and service use, trying to find one “silver bullet” to address these variations may not be possible, she said.
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