Evaluating Ways to Profile Physicians Based on the Cost of Care They Provide

“Our larger objective was to improve physician cost profiling. It’s used by a large number of health plans...but there are a lot of criticisms about the methodologies.”— Justin Timbie, PhD, RAND health policy researcher and project director for the grant.

Dates of Project: November 2010 through April 2012

Field of Work: Physician cost profiling

Problem Synopsis: Physician cost profiling is an empirical tool that commercial health insurers and the Centers for Medicare & Medicaid Services use, along with quality metrics, to rank or reward physicians and to provide feedback to them.

In earlier studies, RAND researchers found that current methods of developing physician cost profiles could lead to inaccurate or conflicting results. Conventional methods of ranking physicians do not account for differences in the types of services provided by physicians within the same specialty. Conventional methods also do not adjust for the socioeconomic status of the patients, and some physicians believe this could lead to biased comparisons.

Synopsis of the Work: The RAND staff conducted two studies:

  • An analysis of the relationship between a patient’s socioeconomic status and the cost of episodes of care attributed to individual physicians as well as the impact of adjusting for socioeconomic status on physicians’ cost ranking.
  • The application of a new method, propensity score weighting, to compare the cost of care provided by individual physicians with their peers who provide similar services.

Key Findings

  • Adjusting for patients’ socioeconomic status had little impact on a physician’s cost ranking.

  • Physicians’ cost rankings differed significantly between propensity score weighting and conventional methods.

  • Propensity score weighting provided a flexible framework for identifying subsets of physicians who provide similar types of services.

Accounting for the socioeconomic status of patients had little impact on a physician’s relative cost rankings.

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RAND found that identifying medical specialty subsets affects where physicians rank in cost comparisons