Characterizing the Relationship Between Payer Mix and Diagnostic Intensity at the Hospital Level

Background Overuse of diagnostic testing in the hospital setting contributes to high healthcare costs, yet the drivers of diagnostic overuse in this setting are not well-understood. If financial incentives play an important role in perpetuating hospital-level diagnostic overuse, then hospitals with favorable payer mixes might be more likely to exhibit high levels of diagnostic intensity. Objectives To apply a previously developed hospital-level diagnostic intensity index to characterize the relationship between payer mix and diagnostic intensity. Design Cross-sectional analysis Subjects Acute care hospitals in seven states Main Measures We utilized a diagnostic intensity index to characterize the level of diagnostic intensity at a given hospital (with higher index values and tertiles signifying higher levels of diagnostic intensity). We used two measures of payer mix: (1) a hospital’s ratio of discharges with Medicare and Medicaid as the primary payer to those with a commercial insurer as the primary payer, (2) a hospital’s disproportionate share hospital ratio. Key Results A 5-fold increase in the Medicare or Medicaid to commercial insurance ratio was associated with an adjusted odds ratio of 0.24 (95% CI 0.16–0.36) of being in a higher tertile of the intensity index. A ten percentage point increase in the disproportionate share hospital ratio was associated with an adjusted odds ratio of 0.56 (95% CI 0.42–0.74) of being in a higher intensity index tertile. Conclusions At the hospital level, a favorable payer mix is associated with higher diagnostic intensity. This suggests that financial incentives may be a driver of diagnostic overuse.