Standardizing Medicare payment information to support examining geographic variation in costs.

OBJECTIVES: Examination of efficiency in health care requires that cost information be normalized. Medicare payments include both geographic and policy-based facility type differentials (e.g., wage index and disproportionate share hospital), which can bias cost comparisons of hospitals and averages across geographic areas. Standardizing payment information to remove the area- and policy-based payment differentials should normalize much of the observed geographic variability in payments, allowing for a more accurate comparison of resource use between providers and across geographic regions. Use of standardized payments will ensure that observed payment variation is due to differences in practice patterns and service use, rather than Medicare payment differences over which the providers have no control. This paper describes a method for standardizing claim payments, and demonstrates the difference in actual versus standardized payments by geographic region. STUDY DESIGN AND METHODS: We used a nationwide cohort of Medicare patients hospitalized with an acute myocardial infarction (AMI) in 2007, then limited our study to those with Medicare Part A and Part B fee-for-service (FFS), and Part D coverage (n = 143,123). Standardized payment amounts were calculated for each Part A and Part B claim; standardized and actual payments were summed for all services for each patient beginning with the index hospitalization through 12 months post discharge. PRINCIPAL FINDINGS: Without standardization of payments, certain areas of the country are mischaracterized as either high or low healthcare resource-consuming areas. The difference between actual and standardized payments varies by care setting. CONCLUSIONS: Standardized payment amounts should be calculated when comparing Medicare resource use across geographic areas.

Prevalence of multiple chronic conditions in the United States' Medicare population.

In 2006, the Centers for Medicare & Medicaid Services, which administers the Medicare program in the United States, launched the Chronic Condition Data Warehouse (CCW). The CCW contains all Medicare fee-for-service (FFS) institutional and non-institutional claims, nursing home and home health assessment data, and enrollment/eligibility information from January 1, 1999 forward for a random 5% sample of Medicare beneficiaries (and 100% of the Medicare population from 2000 forward). Twenty-one predefined chronic condition indicator variables are coded within the CCW, to facilitate research on chronic conditions. The current article describes this new data source, and the authors demonstrate the utility of the CCW in describing the extent of chronic disease among Medicare beneficiaries. Medicare claims were analyzed to determine the prevalence, utilization, and Medicare program costs for some common and high cost chronic conditions in the Medicare FFS population in 2005. Chronic conditions explored include diabetes, chronic obstructive pulmonary disease (COPD), heart failure, cancer, chronic kidney disease (CKD), and depression. Fifty percent of Medicare FFS beneficiaries were receiving care for one or more of these chronic conditions. The highest prevalence is observed for diabetes, with nearly one-fourth of the Medicare FFS study cohort receiving treatment for this condition (24.3 percent). The annual number of inpatient days during 2005 is highest for CKD (9.51 days) and COPD (8.18 days). As the number of chronic conditions increases, the average per beneficiary Medicare payment amount increases dramatically. The annual Medicare payment amounts for a beneficiary with only one of the chronic conditions is $7,172. For those with two conditions, payment jumps to $14,931, and for those with three or more conditions, the annual Medicare payments per beneficiary is $32,498. The CCW data files have tremendous value for health services research. The longitudinal data and beneficiary linkage within the CCW are features of this data source which make it ideal for further studies regarding disease prevalence and progression over time. As additional years of administrative data are accumulated in the CCW, the expanded history of beneficiary services increases the value of this already rich data source.