September 01, 2013
1 min read

IOM discourages use of geographic-based value index for Medicare payments

You've successfully added to your alerts. You will receive an email when new content is published.

Click Here to Manage Email Alerts

We were unable to process your request. Please try again later. If you continue to have this issue please contact

A report from the Institute of Medicine recommends coordinating patient care and exchanging information vs. establishing payment rates based on geography to increase quality and efficiency.

“The [Institute of Medicine] IOM committee recommends that Congress not adopt a geographically based value index for Medicare payments because the majority of health care decisions are made at the provider or health care organization level, not by geographic units,” Joseph P. Newhouse, PhD, chair of the committee, and colleagues wrote in the report brief. “Adjusting payments geographically based on any aggregate or composite measure of spending or quality would unfairly reward low-value providers in high-value regions and punish high-value providers in low-value regions.”

The committee recommended that the U.S. Centers for Medicare and Medicaid Services consider reforms that would encourage health care providers to “share clinical data, coordinate patient care and assume some financial risk for the care of their patients,” according to the report brief.

As part of the Patient Protection and Affordable Care Act, the U.S. Health and Human Services instructed IOM to carry out two studies based on geographically adjusted Medicare payments. In the first study, IOM made recommendations on how to improve accuracy in adjusting payments based on geography. In the second study, IOM noted that geographical adjustments are a small part of the Medicare system and that attention should be focused on improving access to care as well as increasing quality and efficiency. – by Jeffrey Craven

Board on Health Care Services. July 24, 2013.
Newhouse JP et al. Variation in Health Care Spending: Target Decision Making, Not Geography. 2013. National Academies Press.