Is it a difference in health status? Some researchers say this could account for as much as 85% of the difference. But others say such analyses rely on claims data that reflect “reverse causation,” meaning that people look sicker in high-cost areas because physicians and hospitals use more tests and interventions.
So is it in the end, as Dartmouth Institute researcher Dr. Elliott Fisher and colleagues posited from the start, that high-cost areas simply use more services—provider-driven induced demand? Not necessarily, say other researchers, who claim physicians and hospitals may locate where patients are sicker, making the correlation misleading.
The smoking gun: different high-cost regions have different reasons for high spending. Some have higher hospital utilization; others have higher post-acute care spending.
The Institute of Medicine also threw up its hands in trying to solve the spending variation mystery. Last July, the IOM recommended against using a geographic index to adjust payments, fretting that would reward high-cost providers in low-cost areas while penalizing low-cost providers in high-cost areas. It would be better simply to focus on payment reforms that cut across regions, its report concluded.
Follow Merrill Goozner on Twitter: @MHgoozner