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From Health Law Daily, July 25, 2013

Institute of Medicine releases report on geographic variations in health care spending

By Kathryn S. Beard, JD

The Institute of Medicine (IOM) published the conclusions of a comprehensive committee investigation into geographic variations in health care spending and quality of care in a report titled “Variation in Health Care Spending: Target Decision Making, Not Geography.” This is the second of two HHS-sponsored studies conducted by the IOM and focusing on the role of physical location in Medicare payments. For this report, the committee was directed to investigate regional health care spending and quality variations, and to analyze whether potential geography-based Medicare payment policies might encourage high-value care.

IOM recommendations. The IOM concluded that Medicare spending does vary greatly in different regions of the country; however, there also is much variation within geographic areas. Variations within geographic regions are mostly due to the fact that the majority of health care decisions are not made at a regional level but by individual providers or health care organizations. Based on this finding, the IOM does not recommend adoption of a geographically based value index for Medicare payments.

The report provided alternative recommendations that the IOM believes will provide better results than a geographically-based value index. Foremost, CMS should continue testing payment reforms directed at decision-making entities, including value-based purchasing, patient-centered medical homes, bundled payments, and accountable care organizations. These reforms will improve value by providing incentives for health care providers to integrate care delivery, coordinate care with other providers, and share data in real time on service use and health outcomes. In addition, CMS should pilot programs allowing savings for higher-value care to be shared with beneficiaries.

During the transition to new payment models, the IOM recommends that CMS evaluate the impact of reforms on value. To accelerate the transition to new payment models, Congress should give CMS the flexibility to implement changes to improve care value based on its ongoing evaluations. Lastly, Congress should encourage CMS to make changes that would aid further research, including making Medicare and Medicaid data more accessible and collaborating with private insurers to evaluate payment models across payers. To carry out the necessary tasks for increasing access to data, CMS will require additional resources from Congress.

Health Affairs critique. In a blog post, Health Affairs responded to the IOM report. Although the response commended the committee for the depth of its research and agreed with most of its policy recommendations, it criticized the report’s name. Health Affairs is concerned that by including the phrase “Target Decision Making, Not Geography” in the report’s title, the committee may appear to disregard regional health care improvement incentives. Because the factors determining health for a population are environmental, social, economic, and behavioral, Health Affairs cautions against overlooking local and regional approaches to health care reform.

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