There is a long-standing branch of health policy research that attempts to understand why health spending for a person with the same characteristics varies across geographies in the US. One of the primary factors appears to be physician practice pattern differences. Those differences may arise in medical school training or early employment experience and are probably at least partly driven by income-maximizing behavior. Ideally, there is a narrow range of appropriate practice patterns for a specific patient and disease and all physicians would practice in that range. Doing so would likely create substantial savings while improving outcomes. A new paper continues the exploration of this issue, focusing on commercial health plans instead of Medicare, where much of the prior research was conducted. In contrast to Medicare, which has a relatively uniform pay schedule across the country, private health plans have much more variable compensation, within and across geographic markets. (NBER Paper)
The authors used survey data from an earlier paper which categorized primary care doctors’ and cardiologists’ practice style and then examined the extent to which the styles were linked with private health plan utilization and spending. The analysis, however, was limited to heart attack episodes, which may limit the generalizability of the findings. In contrast to Medicare, the authors find little regional variation attributable to practice pattern style in commercial plans. Now this may partly be due to commercial health plans generally having very rigorous practice pattern monitoring and enforcement, particularly for common episodes like heart attacks. And indeed the analysis suggests that the practice style categorization may in part be driven by the payment environment in which the physician functions. But spending on similar patients for similar episodes does not appear highly correlated with the practice style. One important implication is that it is important for all payers to be actively involved in oversight of physician’s treatment behaviors and incenting that behavior to move toward appropriate practice patterns.
