A number of reports have demonstrated extensive geographic spending variation. Some is due to price differences, some to utilization differences. The utilization differences have been extensively studied with an incomplete explanation, but practice patterns driven by training or peer pressure may be the most critical factor. The Health Care Cost Institute has released its most recent look at variation in spending for people covered by employer health plans. The variation in metropolitan areas went from 70% above the national average in Charleston, West Virginia to 41% below the national average in Bakersfield, California.
Otehr high cost areas were Anchorage, New York City and Janesville, Wisconsin. Not much in common, although it appears that often smaller metro areas have higher spending, probably because of less competition. Other low cost areas included Tucson and Flagstaff, Arizona, Fayetteville, Arkansas, and San Bernadino, California. In general, the analysis showed that higher prices accounted for much of the variation, particularly prices for outpatient hospital services. This may reflect hospital ownership of physician practices and a requirement that certain procedures be done in the hospital outpatient department, which tends to be a very expensive location, as opposed to a surgicenter or a doctor’s office.
Of the top ten high-spending metro areas, nine have very concentrated hospital markets. This leads to the higher prices, but also more service use, which hospitals encourage physicians to order. The areas with below-average spending tend to have less concentrated hospital markets and lower prices. Different metro areas in the same state may have different spending patterns. As usual, hospital concentration is what stands out as a factor and increasingly policymakers are recognizing that. We will see if they have the courage to do something about it. (HCCI Report)
