Insurance company cost-profiling methods often misclassify docs

Insurance company profiling methods used to classify physicians by costs in a two-tiered system misclassify physicians 22% of the time, according to estimates in a RAND Corp. report published in the New England Journal of Medicine.

“Consumers, physicians, and purchasers are all at risk of being misled by the results produced by these tools,” concluded the researchers who analyzed aggregated claims data for 2004 and 2005 from four Massachusetts insurance companies. Using “commercial software,” they looked at data from 12,789 physicians in 10 specialties and constructed “homogeneous episodes of care” to create cost profiles for healthcare episodes such as treatments for diabetes, heart attack or urinary tract infection.

Physicians in the lowest quartile were labeled "lower cost." The rest were classified as "not lower cost."

The overall misclassification rate was 22% and ranged from 16% for gastroenterology and otolaryngology and 36% for vascular surgery, the report said. It also noted that the proportion of physicians who were classified by insurance companies as lower cost but actually were not, ranged from 29% for otolaryngologists to 67% for vascular surgeons; and doctors who offered service at lower costs but were not classified as doing so ranged from 10% for obstetrician-gynecologists to 22% for vascular surgeons and internists.

The American Medical Association said the results of the study verified its contention that health insurance cost-of-care rating systems were seriously flawed.

“The RAND study shows that physician ratings conducted by insurers can be wrong up to two-thirds of the time for some groups of physicians,” said AMA President J. James Rohack in a news release. “Given the potential for irreparable damage to the patient-physician relationship, the AMA calls on the health insurance industry to abandon flawed physician evaluation and ranking programs, and join with the AMA to create constructive programs that produce meaningful data for increasing the quality and efficiency of healthcare.”

The study was supported by the Labor Department, National Institutes of Health and Robert Wood Johnson Foundation. The journal noted that the authors of the study have received grants or consulting fees from the AMA, Arkansas Medical Society, Commonwealth Fund and the Massachusetts Medical Society.

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