Insurance plans that encourage members to obtain care from doctors who keep medical costs lower are relying on unreliable estimates of doctors’ performance, which in turn could eliminate the anticipated savings, according to a new study.

The RAND Corp. study, the first assessment of physician cost profiling, suggests that about one-fourth of the 13,788 doctors studied would be misclassified under the cost-ranking system commonly used by insurance plans, according to the findings, published in the New England Journal of Medicine’s March 18 edition.

The study’s authors say cost profiling increasingly is used to decide which physicians will be included in health plan networks, and patients often are provided financial incentives to use physicians that have lower cost profile scores.

“Our findings raise questions about the utility of cost profiling tools for high-stakes activities such as tiered health plans and the likelihood that wide use of these strategies will reduce health care spending,” said John L. Adams, the study’s lead author and a senior statistician at RAND, a nonprofit research organization. “Consumers, physicians and those who pay for health care are all at risk of being misled by the results from these tools.”

Doctors give second opinion

J. James Rohack

The American Medical Association said the research “verifies the AMA’s longstanding contention that there are serious flaws in health insurer programs that attempt to rate physicians based on cost-of-care,” according to J. James Rohack, the physicians’ group president.

“Inaccurate information can erode patient confidence and trust in caring physicians, and disrupt patients’ longstanding relationships with physicians who have cared for them for years,” Rohack said in a statement. “Patients should always be able to trust that the information they receive on physicians is valid and reliable, especially when the data is used by insurers to influence or restrict patients’ choice of physicians.”

He said that the potential for “irreparable damage to the patient-physician relationship” necessitates ending the practice among health insurers.

“The AMA calls on the health insurance industry to abandon flawed physician evaluation and ranking programs, and join with the AMA to create constructive programs that produce meaningful data for increasing the quality and efficiency of health care,” Rohack said.

Based on data from Massachusetts, researchers studied 28 physician specialties in detail, finding that only about 40% of physicians had cost profile scores that were at least 70% reliable – a common threshold for reliability – and fewer than 10% of physicians had cost profiles that were at least 90% reliable.

Cost examination

Among physicians in a hypothetical two-tiered insurance plan, nearly 40% of internists and nearly two-thirds of vascular surgeons labeled as lower cost were not lower cost, according to the RAND study. Physicians in surgical specialties, in particular, appear to have low reliability cost profile scores, while dermatologists’ cost profile scores were the most reliable, the study found.

Insurers have focused cost-saving efforts on physicians because they write the orders that can drive increased heath care spending. Health plans are limiting the number of physicians who receive in-network contracts, offering patients lower co-payments to see preferred doctors and paying bonuses to doctors who keep spending down.

Researchers from RAND Health analyzed information from insurance claims for 2004 and 2005 from four health plans in Massachusetts that provide coverage to about 80% of the non-elderly with private insurance.

The results show that the reliability of cost-profiling scores were unacceptably low for physicians in most of the specialty groups.

Researchers also examined how reliability scores might change across several different scenarios, such as requiring at least 30 episodes of treatment in order to create a profile and different methods for assigning episodes to physicians. While some scenarios modestly increased reliability, the results still fell short, according to the study.

“These ranking systems may be useful for some purposes, but they are not reliable enough at this point to make decisions about encouraging patients to see certain providers or excluding some doctors from insurance networks,” Adams said. “Much work remains to be done to improve these systems before they are used for high-stakes activities.”

He said the current systems may be useful for efforts such as warning physicians that their treatment methods appear to cost more than those used by their peers and urging them to reexamine their practice styles.

The authors noted that while cost profiling shows promise as a strategy to reduce health costs, it cannot be successful until more-robust tools are developed to use claims data and other information to create reliable cost profiles for physicians.