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.