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IOM Committee on Geographic Variation Releases Interim Report on Value Index

March 29, 2013—The Institute of Medicine (IOM) Committee on Geographic Variation in Health Care Spending and Promotion of High-Value Care March 23 released a interim report that analyzes Medicare payment polices that could encourage high-value care, including the adoption of a geographically-based value index. The interim report offers no recommendations, but includes preliminary observations that post-acute care strongly influences geographic variation, quality across conditions and treatments varies widely within hospital referral regions (HRR), and a substantial amount of variation remains unexplained.

The interim report focuses primarily on the potential impact of a geographically-based value index, that modifies provider payments based on cost and quality measures within a geographic region. The report’s first observation is “health care decision making occurs at the individual practitioner organizational level…not at the geographic region level.” Further, it says “a geographic value index does not target an appropriate level of clinical decision making to trigger behavioral change at the patient-provider level. In fact, a geographic value index is not designed to target any level of actual decision making.”

Another observation by the committee is that “if there are substantial differences in provider practice patterns within regions, cutting payments to all providers within a region would unfairly punish low cost providers in high-spending regions and unfairly reward high cost providers in low-spending regions.” The report also highlights the uncertainty surrounding quality and utilization in geographic regions. It says that “although a nontrivial amount of geographic variation can be explained by specific demographic and, potentially, health status variables, a substantial amount of variation remains unexplained.”

Another finding by the committee is most of the variation in spending is “strongly influenced” by post-acute care utilization.

Further analyses commissioned by the IOM found there is variation in health care spending within all geographic regions, and that variation is present between hospitals, physicians in the same group practice, and among individual physicians in an HRR. There also are not consistent evidence that utilization and quality measures are correlated.

This is the second report issued by the IOM committee on geographic variations in health spending. In 2009, a group of U.S. House of Representatives members, known as the Quality Care Coalition, asked the Department of Health and Human Services Secretary Kathleen Sebelius to conduct two IOM studies focused on geographic payments under Medicare [see Washington Highlights, July 20, 2012]. The final report is expected summer of 2013.


Len Marquez
Director, Government Relations
Telephone: 202-862-6281

Christiane Mitchell
Senior Director Health Care Affairs
Telephone: 202-828-0461


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