The National Institute for Health Care Reform and its research arm, the Center for Health System Change, have published a broad reassessment of Dartmouth’s conclusions that “unexplained” geographic variation is a sign of waste and inefficiency. It concludes,  instead, that much of the previously unexplained variation can be explained, that local economic and demographic factors (e.g., poverty) contribute strongly to this previously unexplained variation, and that greater spending often leads to better outcomes. “These findings raise questions about whether narrowly targeted geographic policies can drive critically important system-wide improvements in efficiency and quality of care.”

The full report is available online. The brief summary below, which quotes from it, attempts to capture its major themes.

Geographic Variation in Health Care: Changing Policy Directions     by Jill Bernstein, James D. Reschovsky and Chapin White

As the debate in Congress about health care reform began in late 2008, the Congressional Budget Office (CBO) highlighted work from the Dartmouth Atlas project, which estimated Medicare spending would fall by close to 30 percent if spending in higher-cost areas of the country were somehow reduced to the level of low-cost areas. In policy circles, the idea took hold that modifying payment policies in high-cost areas could reduce unwarranted, inefficient spending. 

Some sources of geographic varia­tion in health spending are warranted, such as input price and the burden of illness. Moreover, if higher spending produced higher quality, it might be warrant­ed, while ineffective or inappropriate treatments are not warranted. Over time, as research methods have improved, less geo­graphic variation in health care appears to be unexplained, and there is no sound way to attribute the remaining, unexplained variation to any particular cause.

Dartmouth researchers have associated the unexplained portion of geographic variation with the supply of specialist physicians or hospitals, potentially leading to incorrect inferences about the causes of geographic variation—so-called supplier-induced demand. However, recent studies indicate that health sta­tus is a more important factor driving variation in spending than previously believed and that demographic and economic factors, as well as the structure of local health care markets, shape patient preferences and provider practice styles in far more complex ways than early analyses suggested. High spending might reflect inadequately measured health status or some other factor, such as poverty.

Growing evidence suggests that failing to adequately address these complexities may overstate both the extent and implications of geographic variation in health care spending and use.

Some policymakers have used the Dartmouth work to assert that “more is not better.” However, a growing body of research supports the opposite conclu­sion. For example, several recent studies found that patients admitted to higher-intensity, costlier hospitals had better inpatient and post-discharge survival rates. Still other stud­ies indicate greater total spending results in better health sta­tus and survival rates.

These findings raise questions about whether narrowly targeted geographic policies can drive critically important system-wide improvements in efficiency and quality of care.