Estimating True Resource Costs of Outpatient Care for Medicare Beneficiaries: Standardized Costs versus Medicare Payments and Charges

ObjectiveTo compare standardized estimates of the true resource costs of outpatient health care to the allowable and billed charges for that care among Medicare Fee for Service (FFS) beneficiaries. Data Sources/Study SettingMedicare Carrier and Outpatient Standard Analytic (SAF) files linked to participant data in the Study of Osteoporotic Fractures from 2004 through 2010. Participants were 3,435 female Medicare Fee for Service enrollees age 80 and older recruited in one rural and three metropolitan areas of the United States. Study DesignWe estimated standardized costs for Carrier and OP-SAF claims using Medicare payment weights, and compared them to allowable and billed charges for those claims. We used semilog linear regression to estimate the associations of age, race, bone mineral density, prior fracture, and geriatric depression scale score with allowable charges, billed charges, and standardized costs. ResultsEstimated associations of patient characteristics with standardized costs were not statistically different than the associations with allowable charges (chi-squared [(2)]: 8.6, p=.13) but were different from associations with billed charges ((2): 25.5, p<.001). ConclusionAllowable charges for outpatient utilization in the Carrier file and OP-SAF may be good surrogates for standardized costs that reflect patient medical and surgical acuity.