Variation in Private Plan Payments to Physicians

For public health care coverage programs like Medicare and Medicaid, prices paid to providers for services are dictated by the sponsoring agency.  In the private health insurance market, those prices are typically the subject of negotiation and variation could therefore be expected.  Research in Health Affairs examines the extent of geographic variation in physician reimbursement for common office visits and tries to identify potential reasons for the differences.   (Health Affairs Article)   The research was based on a large private database of of health plan payments to physicians for patients in employer-sponsored plans.  Thirty-three million members were included and the services were office visits for new and established patients, with the office visits having multiple billing levels depending on the complexity of the services involved.  The range of allowed charges for an intermediate office visit, for example, ranged from about $45 to $85, and the variation for other services was similar.  Neither patient nor provider characteristics appeared to account for much of the variation in payments.  As might be expected, non-network doctors tended to be paid more for the same service.  About a third of the variation was accounted for by geographic location, but as often seems to be the case in these studies of payment or spending variation, a very large percent, almost two-thirds, was left unexplained in the analysis.  In terms of geography, in the lowest spending area the average payment for an intermediate visit was under $50 and in the highest spending areas it was over $80.  Interestingly, within the geographic units, variation varied; that is, some geographic units had large payment differences within the unit and some had a small amount of variation.  Although not specifically analyzed, it would seem likely that some of this within locale variation is due to varying market power of physician groups.  Unless the price differences are clearly related to quality, which there is no evidence to support, there would appear to be an opportunity to reduce the higher payments.  Finally, the authors note that the variation in health care prices paid to physicians is not substantially greater than that for many non-health care goods and services.