Impact of Socioeconomic Adjustment of Physicians' Estimated Relative Cost of Care

 A doctor talks to a patient in an exam room.


Current cost-profiling efforts already account for differences in patients’ socioeconomic status in physician cost care.



The Issue:

Research has shown that for a variety of reasons, low-socioeconomic status (SES) patients have higher costs of care (as well as less preventive care and fewer office visits), than higher SES patients. As physician payment structures change, this could penalize physicians caring for low-SES patients by adjusting their payment modifier down.


Key Findings:

  • Patients in the lowest SES quintile had unadjusted episode of care costs $80 higher (15% higher) than those in the highest SES quintile. Case mix variables explained 69 percent of the cost variance.
  • After applying an SES adjustment, few physicians (1.1%) changed in their relative cost ranking by more than 2 percentile points. These physicians were more likely to serve disadvantaged populations.


About the Study:

These investigators explored the relationship between SES cost of episodes of care for individual physicians in three commercial health plans in Massachusetts—9,231 physicians treated 785,726 patients for 2.1 million episodes of care over two years. An episode of care is a bundle of services related to a specific chronic or acute condition that is delimited in time. Patients were assigned severity levels relative to other patients. The researchers applied an SES index of six components: (1) annual household income; (2) education; (3) unemployment; (4) head-of-household status; (5) receipt of public assistance; and (6) poverty status.