IOM: Geographic Value Index Won't Fix Variation

Cheryl Clark, March 25, 2013

Variation in healthcare spending is so deeply embedded, even within 3,426 hospital service areas and within physician practices, the imposition of a payment index to discourage high spending would punish those who deliver low-cost, high-value care.

That's the conclusion from the Institute of Medicine's Committee on Geographic Variation in Health Care Spending interim report, one in a series contracted by the Centers for Medicare & Medicaid Services. CMS asked the 20-person IOM committee to recommend how Medicare Parts A, B, and C payments should include a geographic value index depending on spending and value in those regions.

"These preliminary observations suggest that a geographic value index would reward low-value providers in high-value regions and punish high-value providers in low-value regions," the committee said.

The issue is a critical one, because according to one report from the Dartmouth Atlas, "Medicare spending would drop by as much as 29% if practices of low-cost, high-quality regions were adopted nationwide, significantly improving healthcare for Medicare beneficiaries."

The IOM report noted that because of this, "some policy makers believe that Medicare should adjust hospital and physician reimbursement rates based on regional performance to encourage more uniform healthcare system performance for Medicare beneficiaries across hospital markets."

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