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Recently Conrad Cyburn posted a note about the approach of Kaiser to keep costs down while quality high. They do a good job of avoiding the variations in care that exist across the country and which are part of thereason that caare is both expensive and not as good as it could or should be. There are wide variations in care expenditures from geographic region to region. One might assume that those regions with higher expenditures reap better health but that is simply not the case. Unfortunately, much of medical care is not delivered based on evidence of efficacy but rather on long standing practice, tradition or training many years before. Indeed there is some pretty firm data that suggests that where there are more specialists, and where there is “more capacity” that it will get used more and drive up the total cost of care. Some very interesting studies coming from Dartmouth Medical Center have tracked this over the years. In a recent analysis of Medicare data from 2001-2005, the Dartmouth investigators looked at the last two years of life for Medicare recipients with complex chronic diseases such as heart failure, kidney failure and dementia. They picked those two years of life because they account for about one-third of all Medicare expenditures. What they found was a wide variation in costs or expenditures due to a wide variation in the use of services such as specialists, intensive care unit days, hospital days and so on. And this related directly to local medical care capacity. Where there was more capacity, there was more use and therefore higher expenditures. On average these Medicare patients each accounted for about $46,000 of expenditures by Medicare during those last two years of life. But in states with high capacity like New Jersey the average expenditures per patient were $59,000 and in an area like North Dakota where capacity is relatively low the average expenditure was $33,000. Certainly a wide difference and yet they could find no significant difference in the quality of care or patient outcomes. So they made a suggestion. If the use rate across the country was equivalent to the use rate in Minnesota, which is also where the Mayo Clinic is located, Medicare would have saved $18 billion per year for each of the years 2001-2005. They were not suggesting trying to bring it down to the North Dakota expenditure rate but they were suggesting that there was no reason why it could not be brought down towards the national average, an average which just about everyone would agree can produce a very effective medical result. The Dartmouth investigators pointed out that the “variations allow us to rule out two overly simplistic explanations for spending growth. First ‘technology’ is clearly an insufficient explanation: residents of all US regions have access to the same technology.” Second, these regional differences cannot be caused by “differences in the current payment system” since they all were on fee for service Medicare plans. “The causes must therefore lie in how physicians and other respond to the availability of technology in the context of the fee-for-service payment system.” They studied physicians in various regions and were able to show that physicians in all regions recommended specific evidence-based interventions for similar problems. But those in high consumption of resources areas were much more likely to recommended discretionary services, such as referral to a subspecialist for typical esophageal reflux. It was this use of discretionary services that resulted in the wide variation in per capita spending.

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