Geographic variation in healthcare spending
An interim report on geographic variation in healthcare spending released by the Institute of Medicine observes that, even after adjusting for variables such as wages, rents, and attributes of Medicare patient populations, including age and health status, a significant amount of regional variation in Medicare payments remains unexplained. Overall, differences in Medicare patients’ age, sex, and health contribute to, but do not fully explain all the variation.

Defensive medicine costs more than $250 million a year
Data from a survey published in the Journal of Orthopaedic Trauma suggest that defensive medicine among orthopaedic trauma surgeons is a significant factor in healthcare costs. The survey of 1,214 orthopaedic surgeons found that, among orthopaedic traumatologists, 22 percent of all ordered tests were for defensive reasons, and defensive hospital admissions averaged 9 percent each month. Based on 2011 Current Procedural Terminology code reimbursement data, the research team calculated defensive medicine costs per respondent to be approximately $7,800 monthly or $94,000 per year, or $256.3 million annually across approximately 2,274 U.S. orthopaedic trauma surgeons.

Physician employment by hospitals
An article in HealthLeader’s Media cites data showing that the medical staff model of working with independent physicians is in decline and notes that younger physicians are displaying a generational shift in their overall work philosophy to focus more intently on patient care but also to give their lives stability. According to the author, under some circumstances, employing physicians can actually decrease organizational alignment and ultimately affect the hospital’s profitability.

NEJM on sequestration and its effects
A perspective piece published in the New England Journal of Medicine (NEJM) (April 4) summarizes and examines the effect of sequestration on the healthcare sector. As of April 1, a 2 percent reduction in Medicare reimbursement went into effect; the National Institutes of Health is facing an 8.2 percent across-the-board reduction in funding ($1.55 billion); and the U.S. Centers for Disease Control and Prevention anticipates effective reductions of 8 percent to 10 percent for the remainder of the year. Most expenses associated with the Patient Protection and Affordable Care Act, Medicaid, and the Children’s Health Insurance Plan are largely exempt from the effects of sequestration.

House leaders update SGR replacement proposal
MedPage Today reports that leaders in the U.S. House of Representatives have released further details on a proposal to repeal the Medicare Sustainable Growth Rate (SGR) formula and replace it with an alternative system. The proposal outlines a three-phase plan that begins with repeal of the SGR and transitions to a payment system based “in part, on the quality of care provided to beneficiaries.” During the third phase, providers “who meet a minimum quality threshold will also have an opportunity to earn additional incentive payments based on efficient use of health care resources.” The plan also suggests aligning incentives with ongoing Medicare programs such as the Physician Quality Reporting System and with private payer initiatives.

These items originally appeared in AAOS Headline News Now, a thrice-weekly enewsletter that keeps AAOS members up to date on clinical, socioeconomic, and political issues, with links to more detailed information. Subscribe at www.aaos.org/news/news.asp (member login required)