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This week’s paper is brought to you by: Dr Tim Wilson, Managing Director

Full reference and title from the journal:

Cutler, David, Jonathan S. Skinner, Ariel Dora Stern, and David Wennberg. 2019. “Physician Beliefs and Patient Preferences: A New Look at Regional Variation in Health Care Spending.” American Economic Journal: Economic Policy, 11 (1): 192-221.


Authors conclusion

There is considerable controversy about the causes of regional variations in health care expenditures. Using vignettes from patient and physician surveys linked to fee-for-service Medicare expenditures, this study asks whether patient demand-side factors or physician supply-side factors explain these variations. The results indicate that patient demand is relatively unimportant in explaining variations. Physician organizational factors matter, but the most important factor is physician beliefs about treatment. In Medicare, we estimate that 35 percent of spending for end-of-life care and 12 percent of spending for heart attack patients (and for all enrollees) is associated with physician beliefs unsupported by clinical evidence.

3V bottom line

Unwarranted variation dwarves productivity gains in healthcare, and is in large part driven by clinical beliefs unsupported by evidence.

3VH – Implications for value

The fab four, as 3V like to call them are

  1. Prevention
  2. Cost effectiveness
  3. Quality & safety, and
  4. Productivity.

As a set of four they have served us well, but they necessary but insufficient for sustainable healthcare.

When a population health perspective is taken in health and social care, we start to see variations in practice completely unexplained by need or preference. And those variation in practice dwarf any improvements made by the fab four.

At a recent conference, a leading UK teaching hospital proudly presented a 6% reduction in cost and improvements in quality for their hip replacement pathway; but they did not know if the population they served were having 50 or 210 hip replacements/ 100,000 people per annum- the variation in hip replacements across England. So, their 6% technical efficiency gain (this would be Porter’s definition of value) is tiny compared to the 400% variation in hip replacement rates. Were they doing too many or too few, and was their inequity in who was receiving hip replacements? Only a population perspective gives you this understanding of value.

This week’s paper starts to help us understand why this variation occurs, and the authors outline that a large element is due to medical beliefs about treatment, often unsupported by evidence. What does that mean? People are receiving, or not receiving, treatments incorrectly- the silent misdiagnosis as Al Mulley calls it.

But establishing the right number of hip replacements and changing clinical practice is not straightforward. Hence, we need networks working across organisational boundaries, and focused on populations to address unwarranted variation. And those networks in turn need to make sure care is personalised, people only receive treatment if they have decided so in the full unbiased knowledge of the likelihood it will achieve the outcomes that matter to them.