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Concentration of High-Cost Patients in Hospitals and Markets
Nancy D. Beaulieu, PhD; Karen E. Joynt, MD, MPH; Robert Wild, MS, MPH; and Ashish K. Jha, MD, MPH
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Concentration of High-Cost Patients in Hospitals and Markets

Nancy D. Beaulieu, PhD; Karen E. Joynt, MD, MPH; Robert Wild, MS, MPH; and Ashish K. Jha, MD, MPH
High-cost patients are only modestly concentrated in specific hospitals and healthcare markets.
ABSTRACT
 
Objectives:
Although we know that healthcare costs are concentrated among a small number of patients, we know much less about the concentration of these costs among providers or markets. This is important because it could help us to understand why some patients are higher-cost compared with others and enable us to develop interventions to reduce costs for these patients.

Study Design: Observational study.

Methods: We used a 20% sample of Medicare fee-for-service claims data from 2011 and 2012, and defined high-cost patients as those in the top 10% of standardized costs. We then characterized high-concentration hospitals as those with the highest proportion of high-cost patient claims, and high-concentration markets as the Hospital Referral Regions (HRRs) with the highest proportion of high-cost patients. We compared the characteristics and outcomes of each.

Results: High-concentration hospitals had 69% of their inpatient Medicare claims from high-cost Medicare beneficiaries compared with 51% for the remaining 90% of hospitals. These hospitals were more likely to be for-profit and major teaching hospitals, located in urban settings, and have higher readmission rates. High-concentration HRRs had 13% high-cost patients compared with 9.5% for the remaining 90% of HRRs. These HRRs had a smaller supply of total physicians, a greater supply of cardiologists, higher rates of emergency department visits, and significantly higher expenditures on care in the last 6 months of life.

Conclusions: High-cost beneficiaries are only modestly concentrated in specific hospitals and healthcare markets.

Am J Manag Care. 2017;23(4):233-238
Takeaway Points
  • High-cost patients were only modestly concentrated in hospitals; those that disproportionately cared for high-cost beneficiaries were generally larger, academic teaching institutions with better outcomes on mortality but higher readmission rates. 
  • High-cost patients were only modestly concentrated in markets. We saw differences between the markets that were more concentrated versus not; concentrated markets had much higher proportions of racial and ethnic minorities and individuals in poverty. 
  • Efforts to lower spending among high-cost patients should remain broad. Policy efforts need to target the special needs of organizations and communities disproportionately serving high-cost beneficiaries.
High and rising healthcare costs are the single biggest challenge facing federal and state governments, many businesses, and families. These healthcare costs are highly concentrated among a small number of patients; for example, just 10% of Medicare patients account for more than half of all Medicare spending.1,2 There is broad consensus that we will need to improve care for this population of highly expensive patients in order to manage spending and improve outcomes.3-6

Although we know that healthcare costs are concentrated among a small number of patients, we know much less about the concentration of healthcare costs among providers or markets. This is important information as it could help us to understand why some patients are higher-cost compared with others and help us begin to develop interventions to reduce costs for these patients. For example, if differences in practice patterns between providers are a major driver of costs, we would expect to see high-cost patients clustered within a subset of providers. Such clustering would suggest that interventions might be more effective if they targeted physicians with a high proportion of high-cost patients. Similarly, it is possible that geographic variation in practice patterns is the dominant feature; if this were true, we would expect to see clustering of high-cost patients within communities and we would need to design interventions that address the practice patterns or underlying medical needs of these communities. However, we know very little about whether care for high-cost patients is concentrated and, if so, whether the characteristics of the providers and communities where these patients are disproportionately situated differ from those providers or communities with a lower concentration of high-cost beneficiaries.7,8

Hospitals are the setting where most expenditures for high-cost patients are incurred. Therefore, in this study, we set out to answer 2 sets of questions: 1) Are high-cost patients concentrated among certain hospitals? If so, how do hospitals that disproportionately care for high-cost patients differ from other hospitals? 2) Are high-cost patients concentrated within certain communities? If so, how do communities with a high proportion of high-cost patients differ from those communities with lower proportions of high-cost patients?

METHODS

Data

We used a 20% sample of Medicare fee-for-service (FFS) claims data from 2011 and 2012. Patients enrolled in Medicare Advantage and those not continuously enrolled in Parts A and B during the study period were excluded from our analysis because we do not have complete data on annual healthcare costs in these subpopulations. We excluded those younger than 65 years because they are a highly heterogeneous population, achieving eligibility for Medicare based on clinical conditions (eg, end-stage renal disease) that are highly correlated with spending.

Patient race was categorized in the Medicare data based on self-report. We assigned comorbidities using CMS Hierarchical Condition Categories and based on diagnoses in inpatient, outpatient, and carrier claims. Cost information was aggregated from all Medicare claims files, including inpatient, outpatient, carrier, skilled nursing facility, home health, hospice, and durable medical equipment. International Classification of Diseases, Ninth Revision, Clinical Modification (ICD-9-CM) codes were used to identify comorbidities.

We focused on general acute care nonfederal hospitals and only included those with a minimum of 17 beneficiaries in 2012 (from our 20% sample), thus eliminating the very smallest of hospitals. Failure to exclude these hospitals would have led to the identification of very small hospitals as disproportionately caring for the highest-cost patients; for example, in a hospital with only 3 Medicare claims, 1 from a high-cost patient would be reported as having 33% of its patients being high-cost. We used the American Hospital Association Annual Survey to obtain data on hospital structural characteristics and the Hospital Compare database to obtain data on hospital quality and patient experience.9 We calculated both mortality and readmissions using standard methods with adjustment via the Elixhauser comorbidity adjustment scheme, which is commonly used with administrative data,10,11 and which we have used in prior work in this area.12,13 We used Hospital Referral Regions (HRRs), as defined by the Dartmouth Atlas for Health Care,14 to analyze healthcare markets. We obtained data on HRR Medicare spending from the Dartmouth Atlas. Regional demographic characteristics and data on physician and hospital bed supply were obtained from the Area Resource File. We used the Commonwealth Scorecard Health System Data Center to obtain data on population health measures.

High-Cost Beneficiaries

I
n order to identify high-cost beneficiaries, we first calculated total standardized costs of care for each Medicare beneficiary in our sample using CMS methodology.15 By standardizing costs of care, we can identify patients who use a comparable amount of medical care across differing regions in which actual costs of care may vary. For example, although Medicare may pay more for a chest radiograph at a teaching hospital in New York City than at a community hospital in Phoenix, based on differences in wage index and other factors, standardized cost using the Medicare Wage Index assigns the same value to the service in both places. We then defined high-cost patients as those whose spending was in the top decile nationally in 2012.

High-Concentration Hospitals

To define high-concentration hospitals, we first calculated the percentage of the hospital’s claims attributable to high-cost patients. We then calculated the distribution of this percentage among our sample of hospitals and categorized hospitals as high-concentration if their percentage of claims from high-cost patients was in the top decile nationally.

High-Concentration Markets

We next calculated the concentration of high-cost patients within markets and then compared high-concentration and non–high-concentration HRRs. We used HRRs as our geographical unit of observation for healthcare markets. For each market, we computed the percentage of beneficiaries in our sample residing in each HRR who were designated as high-cost patients. We then computed the distribution of this percentage and labeled HRRs as high-concentration markets if their percentage of beneficiaries who were high-cost was in the top decile nationally. We computed statistics on the distribution of annual patient costs, the percentage of beneficiaries in a region who were high-cost patients, and the percentage of a hospital’s claims attributable to high-cost patients. Because costs of end-of-life care constitute a substantial portion of overall Medicare costs, decedents were overrepresented among the group of highest-cost patients; thus, we conducted our analyses with and without those patients who died during the period January 1, 2012, through June 30, 2013. The results were qualitatively similar and we present our primary results based on including decedents.

Analysis

After categorizing high-cost and non–high-cost patients, we first compared characteristics between these 2 groups of patients. We examined the following beneficiary-level predictors of high-cost status: age, race, gender, Medicaid eligibility, and comorbidities. We also investigated the relationship between a number of hospital characteristics and high-cost concentration status. We examined the relationship between high-cost concentration and the following market-level variables: percentages of blacks, Hispanics/Latinos, and the population in poverty; total physician supply; cardiologist supply; number of short- and long-term general hospital beds; and the rate of spending in the last 6 months of life. We also examined the relationship between high-concentration HRRs and health system performance on quality metrics, including potentially avoidable emergency department visits among Medicare beneficiaries, potentially preventable mortality, and percentage of adults 50 years or older receiving recommended screening and preventive care. For all bivariate analyses we used t tests and χ2 tests to assess the statistical significance of differences based on high-cost and

high-cost concentration.

For our multivariate analyses, we estimated logistic regression models of the likelihood of being a high-cost concentration hospital or high-cost concentration HRR as a function of hospital and market characteristics. In the hospital-level regression, we clustered our standard errors within market.

All analyses were performed using SAS version 9.4 (SAS Institute, Cary, North Carolina).

RESULTS 

Characteristics of High-Cost and Non–High-Cost Beneficiaries


There were 4,937,361 Medicare beneficiaries in our 20% sample file, 493,736 of which were categorized as high-cost. As expected, a large percentage of Medicare costs (55%) were concentrated in a small percentage of beneficiaries (10%). The average cost for the high-cost cohort was more than 10-fold higher than that of the non–high-cost cohort. Compared with non–high-cost patients, high-cost patients were more likely to be black (9.84% vs 7.2%; P <.0001) and nearly twice as likely to be eligible for Medicaid (22.5% vs 12.7%; P <.0001) (Table 1). As expected, high-cost patients also had higher rates of chronic disease, including mental health conditions, congestive heart failure, renal failure, chronic obstructive pulmonary disease, and vascular disease (Table 1).

Concentration of High-Cost Beneficiaries by Hospitals

High-cost beneficiaries accounted for a disproportionate share of the Medicare claims at every hospital. The highest decile of ­hospitals had 69% of their inpatient Medicare claims from high-cost Medicare beneficiaries compared with 51% for the remaining 90% of hospitals. The hospitals in the lowest decile of concentration, by contrast, still had 32.6% of their inpatient claims come from high-cost beneficiaries.

If high-cost beneficiary hospital claims and inpatient costs were evenly distributed nationally, we would expect high-cost hospitals to account for 10% of all inpatient claims and costs. We found that high-cost patients and their inpatient expenditures were only slightly more concentrated: just 12.54% of hospital claims attributable to high-cost beneficiaries and 14% of inpatient costs were for care delivered at hospitals in the highest decile of concentration of high-cost patients (Table 2). The median cost per claim in high-concentration hospitals was 15% greater than the median cost per claim in other hospitals (eAppendix Figure 1 [eAppendices available at www.ajmc.com]).

Concentration of High-Cost Beneficiaries in the Markets

 
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