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UnitedHealth Group Inc. (UNH), athenahealth, Inc (ATHN), International Business Machines Corp. (IBM): One Surprising Reason Your State Could Be Paying More for Health Care

Think you’re paying too much for health care in your state? You could be right. Some states report significantly higher health costs than others.

Exactly why this is the case often generates discussions about differences in cost of living and average medical salaries. However, a new study conducted by the National Bureau of Economic Research, or NBER, points to another reason for health care cost disparities. You’ll probably be surprised by NBER’s conclusion from this study.

UnitedHealth Group Inc

Cowboys, comforters, and cost
The NBER researchers used patient and physician surveys along with Medicare data to analyze regional differences in spending. Those differences can be quite large. Price-adjusted-per-patient Medicare spending varies from below $7,000 in some areas to nearly $14,000 in others.

Interestingly, most of the expenditure variation isn’t due to patients having different types of illnesses in different parts of the country. The variation didn’t stem significantly from regional poverty levels, either.

NBER discovered that the single most important factor in accounting for differences in health care spending was physician beliefs that are not supported by clinical evidence. Yep — how physicians think about treatments accounts for a whopping 36% of end-of-life spending and 17% of total U.S. health care spending.

Physicians responding to the NBER surveys were categorized into different groups. The NBER researchers classified those physicians who consistently recommended intensive care beyond established guidelines as “cowboys.” Physicians who consistently recommended palliative care for patients with severe conditions were dubbed “comforters.”

The study found that the more cowboys there were in sample data, the higher the spending levels were. Lower spending levels correlated with higher numbers of comforters.

Another highly predictive category of physicians was based on how frequently the doctors recommended follow-up visits compared to clinical guidelines. As you might expect, larger numbers of physicians in the high-frequency follow-up group corresponded with higher medical costs.

When the NBER analyzed data combining cowboys, comforters, and high-frequency follow-up as variables, it found that more than 60% of regional Medicare spending variation was explained. Several other factors, including patient preference for care, were determined to be insignificant.

Basically, the NBER study suggests that physicians who “follow their gut” rather than established clinical guidelines are driving health care costs higher. Geographic regions that have more of these physicians pay more than those that don’t. Earlier studies have suggested similar that physicians’ views that differ from clinical standards of care could play a big role in higher costs, but none has directly established the correlation between physician beliefs and Medicare spending.

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