The federal government is structuring the payments within these 306 hospital referral regions to address geographic variations now seen in Medicare spending growth.
"There was some discussion in those regulations about using a national growth factor to help compress the geographic variation in Medicare spending," McWilliams says. "So the idea would be in a high-spending growth area using a mean national growth rate to set the spending target would necessarily bring that spending down in the high-spending growth area and vice-versa for a low-spending area. It would bring it up."
Unfortunately, McWilliams says, HRRs can’t draw a correlation between spending growth levels—based on a single year of data or an average across years—and spending growth rates—the percentage change across more than one year.
"There are such things as low-spending level high-spending growth areas, and high-spending level low-spending growth areas. In fact they make up about half of hospital referral regions," he says. "So using a national growth factor would not seem to accomplish the stated rationale in the regulations of compressing geographic variations in spending."
Such a structure makes it difficult for healthcare organizations within specific HRRs to estimate whether the use of a national growth factor to set a spending target would benefit them or not.