Concentration of high-cost patients in hospitals and markets.

OBJECTIVES: Although we know that healthcare costs are concentrated among a small number of patients, we know much less about the concentration of these costs among providers or markets. This is important because it could help us to understand why some patients are higher-cost compared with others and enable us to develop interventions to reduce costs for these patients.

STUDY DESIGN: Observational study.

METHODS: We used a 20% sample of Medicare fee-for-service claims data from 2011 and 2012, and defined high-cost patients as those in the top 10% of standardized costs. We then characterized high-concentration hospitals as those with the highest proportion of high-cost patient claims, and high-concentration markets as the Hospital Referral Regions (HRRs) with the highest proportion of high-cost patients. We compared the characteristics and outcomes of each.

RESULTS: High-concentration hospitals had 69% of their inpatient Medicare claims from high-cost Medicare beneficiaries compared with 51% for the remaining 90% of hospitals. These hospitals were more likely to be for-profit and major teaching hospitals, located in urban settings, and have higher readmission rates. High-concentration HRRs had 13% high-cost patients compared with 9.5% for the remaining 90% of HRRs. These HRRs had a smaller supply of total physicians, a greater supply of cardiologists, higher rates of emergency department visits, and significantly higher expenditures on care in the last 6 months of life.

CONCLUSIONS: High-cost beneficiaries are only modestly concentrated in specific hospitals and healthcare markets.