Exploring Episode-Based Approaches for Medicare Performance Measurement, Accountability and Payment Final Report. 6. Differences exist between geographic areas in per episode payments and care patterns for similar episodes of care.


The mean number of total episodes of all types per beneficiary varied widely among the three states in our analysis, averaging 6.1 episodes per beneficiary in Oregon, 6.9 in Texas, and 8.0 in Florida.  In our analyses, average 2005 per-capita payments were highest in Florida and Texas ($8,380 and $8,432, respectively) and lowest in Oregon ($5,870).  This implies that the cost per episode is lower, on average, in Oregon than in Texas and Florida.  This could be due to either a higher proportion of lower-cost episode types in Oregon or to lower cost per episode of a particular type in Oregon.  The differences in per-episode payments observed in our analyses are not due to price differences since we applied standardized prices to the services within episodes. Geographic variations in practice patterns are common, and undoubtedly contribute to some of the observed variation in the number of episodes per beneficiary as well as the average payments per episode.

The average standardized payment per episode for the episodes related to the nine conditions varied in a consistent pattern across states, although the state with the highest average payments per episode varied across the nine study conditions.  For example, Florida had the highest average payments per AMI-related episodes ($22,206, compared to $22,011 in Texas and $19,837 in Oregon).  But Florida had the lowest average payments per cerebrovascular disease-related episode ($7,524, compared to $7,996 in Oregon and $10,690 in Texas).  Oregon had lower average per-episode payment than Florida and Texas for episodes related to eight of the nine study conditions; only for cerebrovascular disease did Oregon have higher average per-episode payments as compared to Florida.  Florida had the highest payments for episodes related to AMI and Texas had the highest average payments for episodes related to the other eight study conditions.  

The reasons behind these geographic variations in per episode payments and frequency of episodes are unclear.  Part of the observed differences could be related to the claims data used to create episodes and regional differences in claims coding practices among providers.  For example, coding practices in Florida, such as the way in which diagnoses are listed on claims, could potentially trigger a greater number of episodes for care than in Oregon or Texas.  However, other differences are also likely to be important drivers of observed differences across regions, including patient characteristics, regional variations in practice behavior, and the availability of health care resources (such as primary care physicians, specialists, and types of care facilities).  A better understanding of the relative contributions of these various factors to the observed geographic differences could be important, particularly for payment-based applications of episodes.

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