Geographic variation in the volume intensity of Medicare physician services in 1988 : a descriptive analysis

44 Pages·1992·1.6 MB·English

by  Holahan, John

3983-06 May1992
GeographicVariationintheVolume
IntensityofMedicarePhysicianServices
in1988: ADescriptiveAnalysis
JohnHolahan
StephenZuckerman
SupportforthisresearchwasprovidedbytheHealthCareFinancingAdministrationtoThe
UrbanInstitutethroughCooperativeAgreementNo. 17-C-99473/3-01. Thiscooperative
agreementsupportedanumberofresearchhprojectsrelatedtotheMedicareVolume
PerformanceStandardPolicy. Thetotalbudgetforalloftheseprojectswas$449,419and
representsthesolesourceoffunding. Opinionsexpressedinthisdocumentarethoseofthe
authorsanddonotnecessarilyrepresenttheviewsoftheHealthCareFinancingAdministration,
TheUrbanInstitute,oritssponsors.
f
TABLEOFCONTENTS
I. INTRODUCTION I
II. VARIABLEDEFINITIONSANDMETHODS 3
IndicesDefined 3
LaspeyresIndex 3
PaascheIndex 4
Fisher'sIdealIndex 4
AreasDefined 5
Type-of-ServiceDefined 8
Methods 8
III. RESULTS 11
VariationsinAllowedCharges 11
VariationsinVolumeandIntensity 13
UtilizationinSelectedHighandLowVolumeandIntensityAreas 16
VariationsinAllowedCharges,Prices,andVolumeandIntensityby
TypeofAreaandRegion 20
EvaluationandManagementServices 27
Procedures 29
ImagingandTests 30
IV. CONCLUSIONS 32
REFERENCES 35
APPENDDC
ii
' r
LISTOFTABLES
Table
1 DesignationofMedicarePaymentLocalities 7
2 TypeofServiceClassificationSystem 9
3 AreaVariationinMedicareAllowedChargesPerEnroUee,byTypeof
Service,1988 12
4 AreaVariationsinMedicareVolume/IntensityPerEnrollee,byTypeof
Service, 1988 14
5 WhatTypesofServiceExhibittheMostVariations? VolumeandIntensityper
BeneficiaryinAbsoluteDollars 17
6 WhatTypesofServiceExhibittheMostVariations? VolumeandIntensityper
BeneficiaryRelativetotheNationalAverage 18
7 VariationAcrossAreasandRegionsinAllowedCharges,Prices,and
Volume/Intensity—AllPhysicianServices, 1988 21
8 VariationAcrossAreasandRegionsinAllowedCharges,Prices,and
Volume/Intensity-SummaryofResults,EvaluationandManagment
Services,1988 23
9 VariationAcrossAreasandRegionsinAllowedCharges,Prices,and
Volume/Intensity-Procedures, 1988 24
10 VariationAcrossAreasandRegionsinAllowedCharges,Prices,and
Volume/Intensity—ImagingandTests, 1988 25
iii
I
INTRODUCTION
I.
Geographicvariationinhealthserviceutilizationhasbecomeamajorissueforresearchas
weUasforpolicymakers. EvidenceonvariationsacrosssmallareasproducedbyWennbergand
othershasresultedinamajorefforttoanalyzetheappropriatenessofawiderangeofhealthcare
services(WennbergandGittelsohn, 1982;RoosandRoos, 1982;McPhersonetal., 1982;Moore,
1985). Onefocusofsuchresearchhasbeenonidentifyingtheamountofinappropriatecare
(Chassinetal., 1987),witiithegoalofultimatelyimprovingthequalityofhealthservices
availabletoindividualsintheUnitedStatesandelsewhere. Theissueofareavariationshasa
largerpolicycontextaswell. Variationsinutilizationratesimpliesthatsomeindividualsmay
usetoofewserviceswhileothersmayusetoomany. Lowlevelsofutilizationmayindicate
problemsofaccesstonecessaryphysicianservices. Highlevelsofusemayimplyover-
utilization;suchpatternsmaybetiedtoexcessiveMedicareexpenditures,amajorproblemina
timeoffiscalstressingovernmentprograms.
TheissueofwidevariationsinMedicareutilizationalsohasbeenrecognizedinthe
PhysicianPaymentReform(PPR)initiative,legislatedinthe1989OmnibusBudget
ReconciliationAct(OBRA89). ThatlegislationcalledfortheadoptionbyMedicareofarelative
valuescale,withgeographicadjustmentstoMedicarefeesreflectingcostsofpractice,beneficiary
protectionbylimitingcharges,andMedicarevolumeperformancestandards(MVPS),which
placelimitsontherateofgrowthinMedicarefees. Thegeographicadjustmentstofeesandthe
MVPSprovisionsofthePPRdirectiyandindirectiyaddressissuesofgeographicvariationsin
accessandover-utilization. ThegeographicadjustmentstotheMedicarefeesthroughthe
GeographicPracticeCostsIndex(GPCI),generallywillhavethedirecteffectofincreasingfees,
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relativetopre-PPRlevels,inruralareasandreducingtheminurbanareas. OnePPRgoalisto .
increaseaccessintheformer.
TheMedicarevolumeperformancestandardpolicy(MVPS)willtiethefutureupdatesin
physicianfeestotherateofgrowthinthevolumeandintensityofphysicianservices. Asthe
MVPSpolicyhasbeenimplemented,itwilltreatallgeographicareasthesame,regardlessof
^whetherareashavehighorlowlevelsofutilization. TheMVPSisrequired,however,totake
intoconsiderationevidenceofproblemsofaccessandover-utilization,butitisnotspecifiedhow
thisistobedone. PossiblerefinementsoftheMVPStoincludesubnationalvolumeperformance
standardsmightdirectlyaddressproblemsofaccessandover-utilization. AsubnationalMVPS
mightdistinguishbetweenareaswithlowlevelsofutilizationbyrecommendinghigherstandards
thanforareaswithhistoricallyhighlevelsofutilization.
Thispaperpresentsacomprehensivedescriptionoftheextentofcross-sectional
geographicvariationinMedicarephysicianserviceuseratesacrossallservicesandacrossthe
entirecountry. Weuse 1988datafromthePartBMedicareAnnualData(BMAD)systemto
deriveameasureofvolumeandintensitythatcapturesdifferencesinuseratesacrossallservices,
andthatcanbedisaggregatedbytype-of-service(seeBerensonandHolahan, 1990). These
indicesrepresentamajorimprovementoverearlierstudiesthatfocusedonalimitednumberof
procedures(e.g.,Holahan,Berenson,andKachavos, 1990)and/orasmallsetofgeographicareas
(e.g.,Stano, 1986). Ingeneral,dataormethodsthatwouldallowforacomprehensiveassessment
ofthisissuehasnotbeenavailabletoearlierresearchers.
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II. VARIABLEDEFINITIONSANDMETHODS
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Thispaperusesthe 1988BMAD5percentsampleofMedicarebeneficiariesto
decomposeareavariationsinexpendituresperenroUeeintothecomponentduetopriceandthat
duetovolumeandintensity. Becausevolumeand
intensitydifferencescannotbeobserveddirectly,theyaremeasuredasthevariationin
expendituresthatremainsafterpricedifferenceshavebeennettedout. Thisisanimprovement
overChassinetal.(1987)thatreliedonactualservicecounts-alesscomprehensivemeasure
thanvolumeandintensity. Inordertomeasurevolumeandintensity,wedeveloppriceindices
thatcanbeusedtodeflateMedicarephysicianexpenditures(allowedcharges)thattakeinto
considerationthedifferencesinservicemixacrossareas. Areasaredefinedasaggregationsof
the240pre-PPRMedicarepricinglocalitiesthatreflectfundamentaldifferencesincommunity
types(discussedbelow).
IndicesDefined
LaspevresIndex. Themoststraightforwardapproachtothepriceindexwouldbaseiton
thepricesofanationally-representativebasketofMedicareservicesineachareaofthecountry(a
Laspeyresform). However,notallservicesthatareimportantinaggregatespendingdataare
providedineachareaofthecountry. Therefore,itisnotpossibletopricetherepresentative
marketbasketineacharea. Second,sincetherelativeimportanceofeachservicevariesfrom
areatoarea,differencesinexpendituresdeflatedbythepriceindexreflectservicemixaswellas
volumeandintensitydifferences. Servicemixmayvarybecauseofgeographicvariationin
relativeprices,whichisextensive(Escarce, 1990). Preliminaryanalysisofthedatasuggeststhat
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servicemixvariesmuchmorecross-sectionallythanitdoesovertime,makingitessentialto
addressservicemixaswellasvolumeinthispaper.
Standardeconomictheorysuggeststhatanareawillreducetheconsumptionofits
relativelyhigh-pricedservicesandexpandthelow-pricedservices. Thiswouldleadtolesscross-
sectionalvariationintheweightsforhigh-pricedthanforlowpricedservices,ifcomputed
separatelyforeacharea. Thissubstitutionbiasissuewouldsuggestthat,formostgoodsand
services,across-sectionalLaspeyresindexwouldoverstatetruepricedifferences. Ifprices
differentialswereoverstated,thenvolumeandintensityvariationwouldbeunderstated.
However,inthecaseofphysicianservices,itappearsthatarea-levelweightsforhigh-priced
servicesvarymorethanthoselow-costservices. Possibly,thisisduetothefactthatnew
technologiestendtohavehigherpricesandareintroducedatdifferentialratesacrossareas. This
meansthataLaspeyresindexthatreliedonnationalweightswouldtendtounderstateprice
differentialsandoverstatevariationinvolumeandintensity.
PaascheIndex. UsingaPaascheindexinwhichtheweightsweredifferentforeacharea
wouldofcourseresolvetheproblemthatsomeservicesthatareimportantoverallarenot
producedineveryarea. APaascheformoftheindexwouldprovideinformationonthepricesof
thearea'smarketbasketofservicesifitwerepurchasedatthenationalaverageallowedcharges.
However,therewouldbenolinktothenationalaverageimportanceofeachserviceasthereisin
aLaspeyresindex.Giventhegreaterextentofgeographicvariationintherelativeimportanceof
high-pricedservices,thePaaschewouldleadtounderstatementofpricevariationand
overstatementofvolumeandintensitydifferences,thereverseoftheLaspeyresproblem.
Fisher'sIdealIndex. ThisreasoningleadsustoprefertheFisher'sIdealindex,as
discussedinZuckermanandHolahan(1991). TheindexisformedastheproductofaLaspeyres
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indexthatusesnationalweightsfortheservicesproducedinagivenareaandaPaascheindex .
thatusesarea-specificweights. Animportantpointtokeepinmindinthinkingaboutthisindex
isthattheservicesincludedinthecomputationforaparticularareamaydifferfromthose
includedinanotherarea. Theresultingpriceindexwillmeasurethedifferenceinpricesbetween
theareaandthenationforthoseservicespurchasedinthearea. (Oneshouldnottrytocompare
indicesbetweenareas,ascomparisonsareonlyvalidbetweenanareaandthenationalaverage.)
Thecross-sectionalFisher'sIdealwillbecomputedforeachtypeofserviceandforallservices.
TheFisher'sIdealpriceindicesforeachareaforallservicesarepresentedintheAppendix.
ThepriceindicesarethenappliedtodataonallowedchargesfromtheBMADbeneficiary
filetocreatemeasuresofvolumeandintensityforeachgeographicarea. Individualsonthe
beneficiaryfilemayuseservicesintheirownlocalityaswellasanyotherlocalityinthecountry.
Todeflateallowedchargesonthebeneficiaryfileforindividualslivinginagivenareabyprice
indices,forservicesproducedinthatsamearea,willleadtobiasedmeasuresofvolumeand
intensity. Itisnecessarytodeflateallowedchargesforservicesusedineachareabythe
appropriatepriceindexforthatarea. Thisinvolvesaggregatingallowedchargesforbeneficiaries
foreachareainwhichservicesarereceived. Wethendeflatebytheappropriatepriceindexand
finally,sumacrossallareastocreatemeasuresofrealexpendituresbasedontheareainwhich
individualsreside. Inthiswaywehavethemeasureofvolumeandintensityofservicesusedby
beneficiariesineacharea.
AreasDefined
The121geographicareasthatserveasthebasisofthisstudyareaggregationsofthe240
pre-PPRMedicarepricinglocalitiesandcanrepresentbroadcategoriesofareas. Specifically,we
identifysetsoflocalitiesthatrepresentverylargecities,largecitiesadjacenttoverylargecities,
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otherlargecities,smallcities,ruralareasandsmallcities,ruralareas,andstates. Thisisthe
sameareaclassificationschemeusedinHolahanandZuckerman(1991). Table 1indicatesthe
citiesorthegeographicareasthatarewithineachtypeofarea. Verylargecitiesincludetheten
largestMSAsintermsofpopulation. Sinceourdesignationofcitiesisconstrainedbythe
definitionofMedicarelocalities,insomeinstanceswewereforcedtogroupcitieswith
SurroundingareastoapproximateanMSA. Forexample,inSanFranciscowehaveincludedSan
MateoandMarincounties. Washington,D.C.includesadjacentcountiesinMarylandand
NorthernVirginia. LargePennsylvaniacitiesincludePittsburgh,PhiladelphiaandScranton.
Largecitiesadjacenttoverylargecitiesisagroupofcitieswithmorethan 100,000
MedicareenrolleescontiguoustooneofthetenlargestMSAs. Forexample,Oakland/Berkeleyis
adjacenttoSanFranciscoandSanBemadino/RiversideisadjacenttoLosAngeles. Non-adjacent
largecitiesaresimilarlysizedcities,intermsofMedicareenrollment,thatarenotcontiguousto
averylargeMSA. TheseincludeBirmingham,Alabama;NewOrleans,Louisiana;Baltimore,
Maryland;Dallas,Texas,andothers.
SmallcitiesincludeMSAswithlessthan 100,000Medicareenrollees. Theseinclude
Mobile,Alabama;StocktonandBakersfield,California;IowaCity,Iowa;Tucson,Arizonaand
Tulsa,Oklahoma. SmallcitiesandruralareasincludesbothsmallMSAsandruralareaswhere
itwasimpossiblebecauseoftheMedicarelocalitystructuretoseparatethesmallcityfromthe
ruralarea. Ruralareascouldbedefinedin 11statesandareentirelyrural,inthattheycontainno
countiesthatarepartofanMSA. Mostofthe22statesthatcouldnotbesubdividedaresmall
states,butsomearenot,e.g..NorthCarolina,NewJersey,Tennessee,andColorado.
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1
Table 1
Designation of Medicare Payment Localities
VERY LARGE CITIES NONADJACENT LARGE CITIES SMALL CITIES SMALL CITIES/RURAL STATEWIDE
San Francisco, Cal metro area Birmingham, Ala Small cities, Ala Small cities/rural Iowa Arkansas
WMCUiharasbimhaciinang,ogM.taFoslnsa1,11DC metro area NNSSeoaawrncttraheOmrelCanenltadaonr,saN/o,MrCotaLlhnateCreenyt,ralCalFla MMSSeomtrbaocilcellkdet,,ocni,tACilalaeCsal, La SSSSmmmmaaaallllllll cccciiiittttiiiieeeessss////rrrruuuurrrraaaallll NMKKeayabsns MCDNooeenwlltaoawHrnaaaardmeopshire
NDLeYaCrtgreomeittcri,otiMeiascr,heaPenn KBIuanfndfsiaaalsnoa,CimteNyYtrometarroeasarea MBFoarneksetnreosr,feiyeC,ladlC,alCal NSSmomaarlt1lheaccsiitttiieeTssex//rruurraall MMiincnh VNSeoorurttmhhontDDaakkoottaa
Houston, Tex Rochester, NY Small cities. 111 Southeast Tex New Jersey
Los Angeles, Cal SDaanllaAsn,tonTieox, Tex SImowaallCictiyt,iesI,owaInd WSemsaltlerncitTeixes/rural Wash RShooudteh CIasrloalnidna
Seattle, Wash Omaha, Neb Small cities/rural Wise Utah
Milwaukee, Wise Lexington/Louisville, Ky Small cities/rural Ore Alaska
ADJACENT LARGE CITIES APthloaenntiax,, AGariz NS.malClentcriatliesc,itiPeesn,n NY SSmmaallll cciittiieess//rruurraall CVaonn HNaewvaadiai
Oakland/Berkeley, Cal Portland, Ore Fort Worth, Tex Small cities/rural Mo New Mexico
SFoarntBeLarundaedirdnaol/eR,iveFlraside, Cal SHaanrtfDoiredg,o,CoCnaln TSumcasloln,citAireisz, Ga SSmmaallll cciittiieess//rruurraall WOhVi TIednanhoessee
VAEPenaonsautthguherkiSapmt,.s/SiaeCLna/otlNuaiosr,Atnha1,1N1YCCalsuburbs TANSSCktteii.wdnr.ceoiwHPLnnaaoa/ntvuuYaeeilotnrs/u,iMn,,,ignsVMCaontOoeohnawinopno,liOsh,ioMinn OTSRCSutihkalacnalstmhraaafmlh,ooeornsmBddtaOa,,okrnbC,aViCratoaynW,,nv OCkal RSUmaRlAlL cities/rural MD WMMNiyaoirosntmsehiinsgCsairppoliina
Cleveland, Ohio
Columbus, Ohio Rura1 Ala
Dayton/Springfield, Ohio Rural La
Baltimore, MD Northern Rural Cal
Rural Fla
Rural 111
Rural Ind
Rural NY
Rural Penn
Rural Ariz
Rural Ga
Rural Ok
1. Areas are 121 aggregations of 240 Medicare Carrier Pricing localities.
Source: Urban Institute, Health Policy Center
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