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Variation in Use of Medicare Services Among Regions and Selected Academic Medical Centers: Is More Better?

Executive Summary

Initiatives for improving the quality of health care are now focused on stemming the underuse of "effective care"—therapy that is viewed as medically necessary care on the basis of clinical-outcome evidence, preferably from randomized trials. An example is the use of a beta-blocker drug after a heart attack. Causes of such underuse include discontinuity of care (worsened when too many physicians are involved) and lack of infrastructure to assure outreach and the timely use of effective-care services. Pay-for-performance strategies should reduce such underuse.

But while giving providers incentives to do the things they ought to do will very likely increase the use and quality of effective care and save lives, it is unlikely to have a major impact on rising costs; only a relatively small proportion of the health care dollar is influenced by effective care. Most of the spending, at least regarding Medicare, is in other categories—"preference-sensitive care" and "supply-sensitive care"—in which the quality problem is not underuse.

Preference-sensitive care, in which treatment options involve significant tradeoffs that should be based on the patient's own values, tends not to be underused but misused. The causes of this misuse include failure to accurately communicate the risks and benefits of the alternative treatments and the failure to base choice of treatment on the patient's opinion rather than those of others. Adjustment of economic incentives to reward adopters of shared decision-making could lead to a reduction in such unwarranted variation.

The third category of care—supply-sensitive care, in which the supply of resources governs the frequency of their use—is overused, particularly in the management of chronic illness. The causes include overdependence on acute hospital care and lack of infrastructure to support continuous management of chronically ill patients in other care settings. Ironically, populations receiving more supply-sensitive care do not have better outcomes. In one study—in which researchers examined the outcomes of three sets of patients (who had either a hip fracture, heart attack, or colectomy for colon cancer) and followed them for up to five years—the major finding was that regions with greater care intensity showed increased mortality rates.

Hospital-specific measures that profile performance in managing chronic illness could help identify more efficient providers. Moreover, pay-for-performance strategies, along with related strategies to reward efficient providers and pay for chronic-illness management infrastructure, could promote reform.

In that spirit, the author and his colleagues in the Dartmouth Atlas Project profiled the management styles of 77 hospitals, most of them well-known academic medical centers that had been rated by U.S. News and World Report as the nation's "best" for treating geriatric care, heart disease, cancer, and pulmonary disease. Concentrating on patients' last six months of life, the researchers gathered data on several measures: average number of days spent in the hospital during that time, average number of days spent in intensive care units, average number of physician visits, percent of patients who see 10 or more physicians, percent of patients who die in intensive-care units, Medicare spending, and physician labor inputs.

Although selected for their reputations for high-quality care, these hospitals differed remarkably amongst themselves in the way they managed severely ill Medicare patients. This was often true even among hospitals in the same state or city.

The Dartmouth Atlas Project recently made hospital-specific information available for California, and plans to do subsequent releases regarding other parts of the United States. The simple availability of information on the relative efficiency of specific health care organizations in managing chronic illness could prove beneficial. It may stimulate payers to reexamine their provider networks and motivate employers to steer their employees toward efficient hospitals.

In the long run, the most challenging problem will be finding mechanisms to clear regional markets of excess capacity. While special deals made with forward-thinking providers may well result in models of how to deliver care that is simultaneously of high quality and low cost, strategies to assure that all Medicare patients are served by such hospitals remain elusive. If Medicare administrators were willing and able, however, to take steps to select providers on the basis of quality and efficiency—and other payers were willing to play by similar rules—this would serve as a life-or-death wakeup call to the provider community, and it would likely result in accelerated change throughout the nation's health care markets.

Publication Details



J. E. Wennberg, Variation in Use of Medicare Services Among Regions and Selected Academic Medical Centers: Is More Better?, The Commonwealth Fund, December 2005