Medicare Data Reveal Costs of Healthcare

An increase in payments to providers was associated with higher medical and drug costs, researchers found.

Medical providers who receive higher amounts of healthcare industry payments tend to bill higher drug and medical costs, according to a study of Medicare data published in the journal Nature Communications.

A 10% increase in payments to providers was associated with 1.3% higher medical costs and 1.8% higher drug costs, researchers found. That means that a $25 increase in yearly healthcare payments to a medical provider would be associated with approximately $1,100 higher medical costs and $100 higher drug costs.

“Let’s be clear here, we should not find such an association,” said study co-author Jorge Mejia, Ph.D., an assistant professor of operations and decision technologies at the Indiana University Kelley School of Business. “Our findings raise the possibility that medical providers may be unduly influenced by payments from the healthcare industry.”

The association between payments and costs varies across states and correlates with political leaning, being stronger in more conservative states, researchers suggested.

Mejia and his research team investigated providers’ payments and healthcare costs from two open data sources — the Open Payments system and the Medicare Provider Physician and Other Supplier from the Centers for Medicare & Medicaid Services (CMS). The Open Payments system contains information on healthcare industry general payments to individual providers. Medicare Provider Physician and Other Supplier contains data on providers’ Medicare services and procedures, including the cost of each procedure.

Researchers determined the National Provider Identifier (NPI), which was missing from the Open Payments data set, in order to study the relationship between healthcare payments from the Open Payments system and the medical costs in the CMS data.

To determine the NPI, researchers queried the NPI Public Registry, and based on name and address, found exact matches for 90.4% of the unique providers in the Open Payments system. Nearly 375,000 also appeared in the CMS data.

The research team investigated the relationship between healthcare payments to providers and the cost of services and drugs billed to Medicare by the providers. Researchers then assessed how the relationship varied geographically across the U.S.

A 10% difference in healthcare payments to a provider would be associated with an estimated 2.2% difference in medical costs in Louisiana, but a 0.6% difference in Maine or Nevada, the researchers found.

The geographic differences in the payments-costs relationship suggest associations with state-level political, economic or social factors, the study authors reported. Conservative advantage, population size and high school graduation rate, were among the biggest potential drivers of geographic variance.

“We demonstrate the value of open data in providing society with critical insights on hidden costs that can be addressed at the policy level,” said Franco Pestilli, Ph.D., associate professor in the psychological and brain sciences departments at the Indiana University College of Arts and Sciences.

The study is important because it helps interpret the data so the public can better understand what it means, Mejia added.

“As a society, we have had the potential for quantifying and qualifying the influence of the industry on our medical costs,” said Mejia.

But since that has not been done, Mejia hopes Medicare will make it easier for researchers and the public to quantify the effect of the payments received by providers by adding the NPI to their Open Payments data.

The research team is currently investigating how healthcare payments can drive future medical costs, something the researchers believe would bring them closer to establishing a causal relationship between payments and costs.

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