ment. It begins with an analysis of the impact of implementing the Phase I recommendations on hospital and practitioner payments and considers the implications for beneficiaries’ access to care in different geographic areas. It next reviews evidence of geographic differences in access, quality, and the distribution of the health care workforce, and then reviews evidence about the effectiveness of various programs and policies that have sought to influence the supply and distribution of the clinical workforce. After discussing some of the larger payment policy issues considered by the committee, the report offers six recommendations for policy changes that would improve access to care for beneficiaries and address workforce data and policy gaps.

Taken together, the Phase I and II reports seek to increase the likelihood that the geographic adjustments to Medicare payment reflect reasonably accurate measures of input price differences, and are consistent with the national policy goals of creating a payment system that rewards accessible and high-quality health care for all beneficiaries.


In July 2010, HHS commissioned the IOM to produce a report on how to improve the accuracy of the data sources and methods used for making geographic adjustments to fee-for-service Medicare payments. The statement of task for the 2-year study was developed by the IOM and the Centers for Medicare & Medicaid Services (CMS) on behalf of the Secretary of HHS, using language that came directly from Section 1157 of the Affordable Health Care for America Act (HR 3962) (see Box 1-1).1

During the first phase of this study, the IOM Committee on Geographic Adjustment Factors in Medicare Payment (the committee) developed a set of general principles to guide its deliberations (see Box 1-2). The committee made a clear distinction between its technical responsibilities under the statement of task to improve the accuracy of the data sources and methods used to make geographic adjustments, and its responsibilities under the second part of the statement of task to evaluate the impact of the adjustment factors on workforce supply and distribution, beneficiary access to quality care, and population health. Principle 7 from the Phase I report (see Box 1-2) summarizes the committee’s agreement that geographic adjustment should be used only to improve technical accuracy of Medicare payments and that policy objectives, such as equitable access to primary care and specialty services in high- and low-cost areas, should be addressed through separate and distinct measures.

The committee agreed on the importance of focusing its deliberations on issues that reflected geographic variation and Medicare payment policy. Specifically, the committee sought empirical evidence of geographic differences in access to appropriate levels of care for Medicare beneficiaries, quality of care provided to beneficiaries, and provider supply and distribution.


1 A second IOM study was commissioned by HHS based on language from Section 1159 of the House bill. That study addresses variation in health care spending, utilization, and quality across the country for individuals with Medicare, Medicaid, private insurance, or no insurance. Specifically, the IOM committee is examining how variation may or may not be related to factors such as (1) the cost of care, the supply of care, quality of care, and health outcomes; (2) diversity within patient populations, patients’ current state of health, access to care, insurance coverage, and patients’ preferences for their care; (3) market characteristics such as hospital competition, supply of services, public health spending, and the malpractice environment; (4) physicians’ decisions on what care to give and the availability of reliable medical evidence to guide those decisions; and (5) how a geographic area is defined. To address unnecessary variation in Medicare spending, the IOM will recommend changes to specific Medicare payment systems that would promote high-value care. To this end, the IOM will consider alternative health care delivery and payment mechanisms, including a value index based on measures of quality and cost that payers could use to promote high-value services. The study was initiated in December 2009 and the report will be released in March 2013.

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