Acute hospital care is the chief driver of regional spending variation in Medicare patients with advanced cancer

Abstract

The root causes of regional variation in medical spending are poorly understood and vary by clinical condition. To identify drivers of regional spending variation for Medicare patients with advanced cancer, we used linked Surveillance, Epidemiology, and End Results program (SEER)-Medicare data from the period 2004-10. We broke down Medicare spending into thirteen cancer-relevant service categories. We then calculated the contribution of each category to spending and regional spending variation. Acute hospital care was the largest component of spending and the chief driver of regional spending variation, accounting for 48 percent of spending and 67 percent of variation. In contrast, chemotherapy accounted for 16 percent of spending and 10 percent of variation. Hospice care constituted 5 percent of spending. However, variation in hospice spending was fully offset by opposing variation in other categories. Our analysis suggests that the strategy with the greatest potential to improve the value of care for patients with advanced cancer is to reduce reliance on acute hospital care for this patient population.

Keywords: Chronic Care; Health Spending; Medicare; Organization and Delivery of Care; Variations.

EXHIBIT 2. Spending And Spending Variation Attributable To Specific Advanced Cancer Service Categories

Source/Notes: SOURCE 2004–10 Medicare claims linked to Surveillance, Epidemiology, and End Results data for 61,838 subjects with advanced cancer. NOTES Numbers in parentheses beside the category label indicate the difference between the percentage of attributable spending variation and the percentage of attributable spending for the associated category. When this number is positive, the category is identified as a net driver of regional spending variation. Attributable variation sums to greater than 100 percent due to covariance terms.

EXHIBIT 3. Components Of Acute Hospital Category Spending, By Quintile Of Category Spending

Source/Notes: SOURCE 2004–10 Medicare claims linked to Surveillance, Epidemiology, and End Results data for 61,838 subjects with advanced cancer. NOTES The vertical axis shows per capita spending over the first six months after advanced-cancer diagnosis. The number above each series indicates the ratio of spending between quintile 5 (Q5) and quintile 1 (Q1) for the component of category spending represented by that series.

EXHIBIT 4. Components Of Nonchemotherapy Part B Medication Spending, By Quintile Of Category Spending

Source/Notes: SOURCE 2004–10 Medicare claims linked to Surveillance, Epidemiology, and End Results data for 61,838 subjects with advanced cancer. NOTES The vertical axis shows per capita spending over the first six months after advanced-cancer diagnosis. The number above each series indicates the ratio of spending between quintile 5 (Q5) and quintile 1 (Q1) for the component of category spending represented by that series.