Sep 062013

Last month, the Institute of Medicine (IOM) published their much-awaited report titled “Variation in Health Care Spending: Target Decision Making, Not Geography,”[i] which recommends that CMS (Centers for Medicare and Medicaid Services) should not adjust Medicare payments geographically; instead, CMS should continue to focus on value-based payment reforms, such as patient-centered medical homes, bundled payments, and accountable care organizations. Their rationale is that geographic adjustments in payments “would unfairly reward low-value providers in high-value regions and punish high-value providers in low-value regions” (IOM Report Brief, p. 2). The IOM Committee found considerable variation in costs and health care utilization, even with very small units of analysis such as individual hospitals and multi-provider practices. Thus, it would not be fair, and possibly not effective, for CMS to develop payment rewards and penalties at an aggregate geographic level like the Hospital Referral Region (HRR). This report concluded that the differences may result from multiple elements, such as: (1) demand-side factors (patient preferences), (2) supply-side factors (provider supply and preferences), and (3) demographic factors (especially health status).


To read more of this insightful blog by doctoral candidate Shreyasi Deb, read it here:


key words: Medicare, geographic variation, public policy, health care spending, health care economics

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