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HHS Secretary Sebelius Convenes Summit on Geographic Variation

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Last week, Department of Health and Human Services (HHS) Secretary Kathleen Sebelius hosted a National Summit on Health Care Quality and Value, which focused on providers that have implemented health care delivery and quality innovations. It was clear from the Secretary’s keynote speech that HHS is concentrating on delivery system reform and broadening the scope of small-scale innovations for wider applicability. The Secretary’s only mention of next steps in regard to geographic variation in health care costs was to highlight two studies she commissioned from the Institute of Medicine (IOM).

The first study, Geographic Adjustment Factors in Medicare Payment, is examining geographic adjusters for hospitals (wage index) and physicians (geographic practice cost index). It is expected to take one to two years to complete. The second study, Geographic Variation in Health Care Spending and Promotion of High-Value Care, is expected be released in spring 2013. This study will consider a value index based on measures of quality and cost.

Many factors contribute to geographic variation in health care costs. HANYS supports the rigorous and thorough analysis of all underlying factors that cause and characterize geographic variation in health spending. HANYS believes the IOM studies should take into account the cost of all goods and services needed to provide care in a given market, such as health care workers’ wages, and other input prices like special Medicare payment adjustments, in addition to considering local market dynamics, regulatory issues, and utilization of services.

The Secretary agreed to convene this summit as part of negotiations within the Democratic Caucus before the vote on federal health care reform in the U.S. House of Representatives. As the health care reform bill was being developed, a debate over the variation in Medicare per capita spending took place among House Democrats. One group, led by Representative Ron Kind (R-WI) sought the inclusion of policies that would redistribute Medicare funding from hospitals in states like New York where unadjusted per Medicare spending is higher than in states like Wisconsin. Representative Kind’s arguments relied on the narrow work of the Dartmouth Atlas.

HANYS, the Medicare Payment Advisory Commission, and other neutral groups explained that a more robust analysis that accounts for input prices and special Medicare payments for teaching, rural, and safety net hospital must be considered in any examination of variation in spending. Ultimately, a two-year provision was added to the reform bill that distributes new funding to hospitals in low-cost counties. Many New York hospitals in upstate counties benefit from this add-on. Contact: Susan Van Meter

Published October 13, 2010