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The results, shown in Table 4,33 demonstrate that the variation in total Medicare spending across HRRs is heavily influenced by variation in the utilization of post-acute care services. More precisely, 40 percent (0.40 = 2702.77/6739.66) of all variation in Medicare spending is explained by variation in post-acute care services. Within post-acute care, the home health and skilled nursing facility categories have the strongest influence on the variation in spending. Note that the rows in Table 4 are not cumulative, and represent only the reduction attributable to each subcomponent within post-acute care services taken one at a time. The last row substitutes the national means for each service, and thus represents the reduction in variance due to all post-acute care services. Figure 11 illustrates the values in Table 4, and displays the amount of variation in total Medicare spending that is explained by each subcomponent of post-acute care, where “other” represents all non-post-acute services. The subcontractor’s findings are consistent with the Medicare Payment Advisory Commission’s (MedPAC’s) 2012 report to Congress, which found that home health utilization varies substantially by region and state and that rural and urban counties within a region behave similarly (MedPAC, 2012). For example, rural areas in Minnesota compared with the urban areas of LaCrosse, Wisconsin, averaged 5 and 2 home health episodes per 100 Medicare beneficiaries, respectively, in 2009 (MedPAC, 2012).34 That same year, rural areas in Texas and urban areas of Dallas-Fort Worth, Texas, averaged 41 and 38 home health episodes per 100 beneficiaries, respectively.

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33 The committee requested new data from CMS (http://www.iom.edu/Activities/HealthServices/GeographicVariation/Data-Resources.aspx) to further explore sources of geographic variation. Table 4 displays the results of the committee’s subsequent analyses. CMS did not apply risk adjustments for post-acute care and hospice spending. The data reflected above are standardized to remove geographic differences in payments due to factors such as local wages, input prices, medical education, and critical access hospitals (CMS, 2012b).

34 Home health services are paid on the basis of a 60-day episode; that is, if a beneficiary receives 5 or more visits in a 60-day period, the home health agency receives a fixed payment for all visits in that 60-day period. If the beneficiary receives 4 or fewer visits, the agency is paid per visit. Eight rural Texas counties averaged more than 100 episodes per beneficiary in 2009.



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