Medicare Costs and Surgeon Supply in Hospital Service Areas

Objective: To quantify the correlates of variations of Medicare per beneficiary costs at the hospital service area level and determine whether physician supply and the specialty of physicians has a significant relationship with cost variation. Background: The American Medical Association Masterfile data on physician and surgeon location, characteristics and specialty; Census derived sociodemographic data from 2006 ZIP code level Claritas PopFacts database; and Medicare per beneficiary costs from the Dartmouth Atlas of Health Care project. Methods: A correlational analysis using bivariate plots and fixed effects linear regression models controlling for hospital service area sociodemographics and the number and characteristics of the physician supply. Data were aggregated to the Dartmouth hospital service area level from ZIP code level files. Results: We found that costs are strongly related to the sociodemographic character of the hospital service areas and the overall supply of physicians but a mixed correlation to the specialist supply depending on the interaction of the proportion of the physician supply who are international medical graduates. The ratio of general surgeons and surgical subspecialists to population are associated with lower costs in the models, again with difference depending on the influence of international medical graduates. There is a strong association between higher costs and the local proportion of physician supply made up of graduates of non-US or Canadian medical schools and female graduates. Conclusions: These results suggest that strategies to reduce overall costs by changing physician supply must consider more than just overall numbers.