|Physician Cost Profiling Reviewed: Bad Information: Inexpensive Doctors May Not Save Money
Insurance plans encouraging patients to receive care
from physicians who keep medical costs lower are based on unreliable
information, according to a new RAND Corp. study. Notably, estimates of
doctor performance may not achieve the intended savings.
The first major assessment of physician cost profiling
found that about one-fourth of the 13,788 physicians studied would be
misclassified under the system of cost ranking commonly used by
insurance plans, according to the RAND findings published in
the New England Journal of Medicine.
Health purchasers have focused cost-saving efforts on
physicians because they write the orders that can drive increased
healthcare spending. Health plans are limiting the number of physicians
who receive in-network contracts, offering patients lower co-payments
to see preferred doctors and paying bonuses to doctors who keep
"Our findings raise questions about the utility of cost
profiling tools for high-stakes activities such as tiered health plans
and the likelihood that wide use of these strategies will reduce
healthcare spending," said John L. Adams, the study’s lead author
and a senior statistician at RAND. "Consumers, physicians and those who
pay for health care are all at risk of being misled by the results from
RAND analyzed insurance claims information for 2004 and
2005 from four Massachusetts health plans that covered about 80 percent
of the non-elderly with private insurance. It used commercially
available software to examine the costs of treating episodes of common
illnesses such as diabetes and heart attack, assigning each episode of
care to a physician and creating a cost profile for each physician
based on all similar episodes of care.
Studying 28 physician specialties in detail, researchers
found that only about 40 percent of physicians had cost profile scores
that were at least 70 percent reliable – a common threshold for
reliability –and fewer than 10 percent of physicians had cost
profiles that were at least 90 percent reliable.
Reliability of Physician Cost Studies
Among physicians in a hypothetical two-tiered insurance
plan, nearly 40 percent of internists and nearly two-thirds of vascular
surgeons labeled as lower cost were not lower cost, according to the
RAND study. Physicians in surgical specialties, in particular, appear
to have low reliability cost profile scores, while
dermatologists’ cost profile scores were the most reliable.
Funding for the study was provided by the U.S. Department of Labor.
Using statistical tools, researchers evaluated the
reliability of physician cost scores by considering factors such as the
number and types of patients physicians treated. The results show that
the reliability of cost-profiling scores was unacceptably low for
physicians in most of the specialty groups.
Researchers also examined how reliability scores might
change across several different scenarios, suchas requiring at least 30
episodes of treatment to create a profile and different methods for
assigning episodes to physicians. While some scenarios modestly
increased reliability, the results still fell short, according to the
"These ranking systems may be useful for some purposes,
but they are not reliable enough at this point to make decisions about
encouraging patients to see certain providers or excluding some doctors
from insurance networks," Adams said.
He said the current systems may be useful for efforts
such as warning physicians that their treatment methods appear to cost
more than those used by their peers and urging them to reexamine their
While cost profiling shows promise as a strategy to
reduce health costs, it cannot be successful until more robust tools
are developed to use claims data and other information to create
reliable cost profiles for physicians.
Address: The RAND Corp., P.O. Box 2138, 1776 Main Street, Santa Monica, CA 90407-2138; (310) 393-0411, www.rand.org.