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Regional differences in provider prices

Publish date: MAR 15, 2012

Differences in health status explain much of the regional variation in spending for privately insured people, but differences in provider prices—especially for hospital care—also play a key role, accordingto a new study by the Center for Studying Health System Change (HSC).

Based on claims data for 218,000 active and retired nonelderly unionized autoworkers and their dependents, the study found that health spending per enrollee in 2009 varied widely across 19 communities with large concentrations of autoworkers, from a low of $4,500 in Buffalo, N.Y., to a high of $9,000 in Lake County, Ill. The autoworkers’ health benefits are essentially uniform nationally, so spending differences do not reflect benefit differences.

Differences in service quantities accounted for two-thirds of the overall spending variation, while differences in prices accounted for one-third, according to the study.

On the quantity side, differences in health status and other demographic factors explained most, but not all, of the variation in quantity. About 18% of the total variation in spending was a result of unexplained differences in service quantities. On the price side, the cost of doing business explained very little of the price differences, with almost all of the differences in prices unexplained, the study found.

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