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Dartmouth Response to “Target Decision-makers, Not Geography” Report

The title of the Institute of Medicine’s recent report “Target Decision-makers, Not Geography” at first glance appears to be an indictment of the work of the Dartmouth Atlas, which largely claims that policymakers can reduce healthcare spending by targeting the highest spending geographic areas.

A more detailed review shows that the empirical findings from IOM and Dartmouth research are actually fairly similar. The conclusions that the IOM draws from these findings, however, differ from Dartmouth.

Today, I provide some excerpts from Elliott Fisher and Jonathan Skinner’s response to the IOM report published in the Health Affairs blog.

IOM Report Echoes a Number of the Dartmouth Atlas’s Earlier Findings

The report confirmed three core findings of Dartmouth’s research.  First, geographic variations in spending are substantial, pervasive and persistent over time — the variations are not just random noise.  Second, adjusting for individuals’ age, sex, income, race, and health status attenuates these variations, but there’s still plenty that remain.  Third, there is little or no correlation between spending and health care quality.  The report also effectively identifies the puzzling empirical patterns that don’t fit conveniently into the Dartmouth framework, such as a lack of association between spending in commercial insurance and Medicare populations.

What drives regional variation in expenditure: variation in prices or quantity?

The committee also confirmed earlier work by Harvard investigators showing that, for the commercially insured population, variations in the prices paid by private health plans explain most of the variations in private insurance spending.

Post-Acute Care

The report finds that the single largest component of the variation in Medicare spending across regions that remains after risk and price adjustment is due to post-acute care (including skilled nursing facility services, home health care, hospice, inpatient rehabilitation and long term acute care). These services have also been a major source of growth.

Dartmouth agrees with IOM Findings

The committee makes five policy recommendations — and we agree with all of them.

Dartmouth agrees that the “value index” is a poor approach

When the committee was first mandated by Congress in the midst of health care reform in 2010, congressional members from regions with lower costs espoused a “Value Index” in which Medicare would reward low-spending regions with higher reimbursements, at the expense of high-spending regions. The committee concluded that payment mechanisms should not be tied to region, but instead targeted to individual providers, rightly criticizing the Value Index approach as not providing institutions and systems with the right incentives to reduce costs and improve quality.

Despite agreeing with all recommendations, Dartmouth criticizes IOM report title

We believe, however, that the committee, by subtitling the report “Target Decision-makers, Not Geography,” will confuse the media and casual readers (for example, those who don’t make it to page 3-3 in the full report) by appearing to cast doubt on the promise of geographic and regional efforts to improve the quality and efficiency of U.S. health care.

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