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Medicare spending varies more than twofold among hospital referral regions. Spending also varies from state to state, and from one hospital to another, even among hospitals within the same region. Most of this variation is not due to differences in the price of care in different parts of the country, but rather to differences in the volume, or the amount of inpatient care delivered per patient.
Regional variation in Medicare spending is striking. Among the 306 hospital referral regions in the United States, price-adjusted Medicare reimbursements varied twofold in 2016, from about $7,400 per enrollee in the lowest spending region to more than $13,000 in the highest spending region. From 1992 to 2006, total Medicare spending grew at an average rate of 3.5% per year, but this growth was not also spread evenly across regions. These findings have important implications for health policy and the goal of achieving sustainable and affordable health care for all Americans.
Dartmouth Atlas Medicare reimbursement rates are calculated from Medicare claims files from CMS. Fee-for-service patients enrolled in Medicare Parts A and B are included. Patients enrolled in risk-bearing health maintenance organizations (HMOs) are excluded from our analyses. Health maintenance organizations receive capitated payments from Medicare – a fixed annual amount per enrollee – in exchange for which the HMO must provide all required services. Since HMOs do not submit individual claims to Medicare, we must exclude members of HMOs from our claims analyses.
The rates are adjusted for the age, sex and race of the underlying Medicare population using the indirect method. They are also adjusted for regional differences in prices. While price differences explain some of the regional variation in Medicare spending, our studies suggest that utilization – the volume of services delivered – is a far more important driver of Medicare regional payment variation than price differences.
Medicare Reimbursements – by HRR
Hospital referral regions (HRRs) represent regional health care markets for tertiary medical care that generally requires the services of a major referral center. The regions were defined by determining where patients were referred for major cardiovascular surgical procedures and for neurosurgery. Each hospital service area (HSA) was examined to determine where most of its residents went for these services. The result was the aggregation of the 3,436 hospital service areas into 306 HRRs. Each HRR has at least one city where both major cardiovascular surgical procedures and neurosurgery are performed.
Medicare Reimbursements – by HSA
Hospital service areas (HSAs) are local health care markets for hospital care. An HSA is a collection of ZIP codes whose residents receive most of their hospitalizations from the hospitals in that area. HSAs were defined by assigning ZIP codes to the hospital area where the greatest proportion of their Medicare residents were hospitalized. Minor adjustments were made to ensure geographic contiguity. This process resulted in 3,436 HSAs. When these regions were created in the early 1990s, most hospital service areas contained only one hospital. In the intervening years, hospital closures have left some HSAs with no hospital; these HSAs have been maintained as distinct areas in order to preserve the continuity of the database.
Medicare Reimbursements – by State
Medicare Reimbursements 2016 – by County
- Durable Medical Equipment Reimbursements per Enrollee: Data come from the Durable Medical Equipment file.
- Home Health Agency Reimbursements per Enrollee: Data come from the Home Health Agency file.
- Hospice Reimbursements per Enrollee: Data come from the Hospice file.
- Hospital & Skilled Nursing Facility Reimbursements Per Enrollee: Data come from the Medicare Provider Analysis and Review (MedPAR) file.
- Outpatient Reimbursements Per Enrollee: Data come from the Outpatient file.
- Physician Reimbursements Per Enrollee: Data come from the Physician/Supplier Part B – Carrier File.
Medicare beneficiaries age 65-99 enrolled in both Medicare Parts A and B. Patients enrolled in risk-bearing health maintenance organizations (HMOs) are excluded.
For more information about price adjustment, click here.
A New Series of Medicare Expenditure Measures by Hospital Referral Region: 2003-2008 Jonathan Skinner, Daniel Gottlieb and Donald Carmichael (Dartmouth Atlas Project Report – 6/21/2011)