Not So Special After All! An Analysis of Physician Specialization on the Cost and Quality of Care Provided to Medicare Beneficiaries

Abstract

This paper examines the relationship between specialization in the physician workforce and the cost and quality of care that Medicare Fee-For-Service beneficiaries received in the US for the years 1996 and 2002. These years are of note, as they encompass the duration of the Balanced Budget Act, a major overhaul to the Medicare program, and allow for an examination of the policy’s impact on the relationships of interest. While past research indicates that specialization is associated with higher spending and lower quality care, the range of tested outcome measures and years is limited, and no decisive pattern has been found for the Medicare population at the state level. In response, I use regression analysis to explore the effects of specialty physicians, primary care physicians, and registered nurses on average state reimbursement levels, and also on four measures of states’ quality of care: the use of effective care, the discharge rate for ambulatory care-sensitive conditions, in-hospital mortality, and days spent in the intensive-care unit during the last six months of life. In line with my expectations, I find that states with more specialists have higher reimbursement levels and lower quality care, while states with more primary care physicians have lower reimbursement levels and higher quality care in 1996. However, some of the results deviate from my expectations. Most notably, the level of nurses is associated with lower spending and higher quality care in 2002. Furthermore, the magnitude of the positive association between specialty care and spending is unchanged in 2002, while the magnitude of specialty care’s association with lower quality care is reduced. Finally, the magnitude of primary care’s association with higher quality care is also reduced in 2002.