For over 20 years, the non-profit Dartmouth Atlas of Health Care has done research to explain regional variations in healthcare. It will surprise no one that it costs more to take care of sick people than those who are relatively healthy. But does that account for the difference in annual Medicare costs (2006) per beneficiary in Honolulu ($5,311) compared to Miami ($16,351)?

Physicians’ Decisions Account for Most Regional Variation
According to a recent study in The New England Journal of Medicine, 70% of the differences in healthcare spending by region can’t be explained by the health status of the population. Compared to so-called “low spending regions,” Medicare beneficiaries in the highest spending regions spend more time in the hospital (average of 2.1 days vs. 1.4 days), have more frequent physician visits (14.5 vs. 10.7 per year), undergo more MRI procedures (21.9 vs. 16.6 per 100 beneficiaries), and have more computerized tomography (CT) scans (61.4 vs. 46.9 per 100 beneficiaries). The authors conclude that discretionary decisions by physicians account for most of the regional variation in spending.

The obvious conclusion: We can reduce the cost of care without sacrificing the quality of care. The economics of our current healthcare financing system inadvertently drives up utilization and cost, and it’s up to the payer to change the economics in order to yield different results.

Let me know what your experiences and thoughts are regarding regional differences in healthcare spending.