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Medical Practice Variations – Evidence-based Solutions Pertaining to Public Health

Submitted by on September 3, 2013 – 8:49 PM


Importance: Medical Practice Variation (MPV) refers to dispersion in practices of physicians in terms of hospitalizations, prescriptions, diagnostic procedures and medical-surgical interventions. There are several types of MPV: regional variations, small area variations, public and private variations and patient preference variations. (1) All practice variations are not bad. In Lower and Middle Income Countries (LMICs), limited resources have to be distributed in a way so that the least-advantaged in the society have equal access to health care (2, 3).


Theoretical Basis: MPV can be theoretically explained by integrating Roemer’s Law, Supplier-Induced Demand, Cost Variation, Information Asymmetry, Managed Care, Cost-effective analysis, and Case-mix: Diagnosis Related Groups. (4, 5) The rationalization of theories is given latter in discussion part. Studying economic consequences and comparative price variation (cost variation analysis) is significant because it provides insight into the different price levels remunerated by payers to health care providers.


Relevance to Health Policy challenges: If a provider has a higher relative price than another provider, it generates questions as to why prices vary to such an extent, and if the variation in prices is rational or justifiable. As most of the LMICs are dealing with mixed health care setups and trying to control health care costs while maintaining quality, cost variation analysis can provide transparency in providing price variation for consumers (patients), providers, and policy makers (6, 7).



A literature search was performed from 20th Feb, 2013 to 26th Feb, 2013 to identify books and articles regarding connection of terms ‘practice variation’ and ‘cost variation’ using the Pub Med and Google Scholar electronic databases. ‘Medical Practice Variation’, ‘Case-mix’ and ‘Cost Variation’ were used as keywords. It yielded 47 freely accessible peer-reviewed articles. Few institutional papers of W.H.O. and working papers of USA and Europe based organizations were also yielded.


The selection of articles was done on the basis of dates of publication, sources of publication, study types, statistical analysis and objectivity of key findings. Table in the appendix summarizes the literature review. All commentaries and prologues were excluded to increase internal validity and quality of review. Attention was given to the commonly used term ‘unwarranted’ as to avoid confusion with other types of variations when books and reading materials were consulted.


The search results did not yield any peer-reviewed action research of local context. The books consulted for reference were Sherman’s Economics of Health and Healthcare and Henderson’s Health Economics and Policy. Due to analogous economic affairs, I have used US researches in the review.


Discussion and analysis:

Health systems challenges: Wennberg, Goodman, Sepucha, Edday and Bojakowski agreed that MPV is a variation in medical resources, utilization, and outcome that is due to differences in health systems performance.  Practice variations are not always bad. There are several reasons of practice variations that are increased level of uncertainty in health care, information asymmetry and patient preference. Practice style was first thought to be major cause of variation.


But later, it was identified that not only physicians induce demand, but there are several other factors that induce demand. Epidemiology plays a big role in practice variations, such that hospitalizations due to certain diseases vary in different areas. (8-15) Also, there is an excuse according to Roemer’s law that a bed has to be occupied if it is provided in the system. (16) Besides, supplier inducements there are other health system challenges that cause variation in practices between public and private hospitals.


In Pakistan, models of managed care, case-mix i.e., Diagnosis Related Groups and private insurance are not practiced often. Hence, major burden of health care is incurred directly by patients i.e., out of pocket payments. (17)


Economic relevance to the challenges: Health economics has grown as a field to resolve health systems issues. It has provided various evidence based options to minimize and control supplier-inducements. Moreover, it has ensured policy makers to justify the supply of more health services i.e., new drugs, more beds and advance technology. (4, 5) A well known method to control the cost variation is to conduct Cost Effective and Cost Variation Analysis.


The determination of price variation among different regions as well as price variation in services provided in similar level of hospitals can be conducted. This will ensure that consumers are well aware of the variation in costs. (18) It can only be possible if true data related to hospitals (public as well as private) are available. Moreover, Managed Care models have reduced the unwarranted variations in costs between public and private hospitals.


This holds true because the control of setting up the prices is regulated by the third party and suppliers of health care have to limit their inducements. A more rational and practically applicable model is the Case-mix model. It is the key funding model currently used in Australia and United States of America (USA) for reimbursement of the cost of patient care. A blend of cases in a hospital illustrates the diversity, clinical density and the demands for health care resources in a group of patients.


All the patients who have been treated in hospitals are categorized in groups where other patients have the similar condition, (based on diagnosis, procedures and ages) co-morbidities and special needs. These groups are referred as Diagnosis Related Groups (DRGs) in USA. (19) There is also a debate whether these strategies are currently intervened to control cost variation due to differences in practices or if they have just been able to assist health governing agencies about the burden of certain diseases in particular ages and regions. Lastly, a strategy to control variation in practices is formulation of standards and provision of incentives to abide by those standard guidelines. (20, 21) If physician groups or particularly hospitals are provided incentives to follow standard protocols, it has shown improvements in terms of decrease in length of stays, reduction in hospital acquired infections and unnecessary surgical interventions (4, 5).


Recommendations: By exclusively analyzing which strategy will work most suitably in Pakistan, it is difficult to conclude anything without doing impact researches and vigorous hospital related data collection. Comparing current mixed systems of Pakistan with western researches, attention has been directed towards: 1) implementing clinical pathways for standardization; 2) improving public and private partnerships; 3) regulating a capitation system of payments; 4) restructuration of HMIS data; 5) introduction of managed care (special attention to provision of safety-nets); and 6) conducting Risk Adjusted Cost Effective (RACE) analysis.



Firstly, there is a dearth of local and regional peer-reviewed policy research on economics of medical practice variations. Secondly, there a is weak connection of behavioral economics and health economics in studies from developed world.



In a nutshell, variations in medical practices have been observed since long and there is  no way it can be completely restricted. Hence, policy reforms must not only be focused to control and minimize cost variations observed but also to decrease the information gap about rational practices between suppliers and consumers. Quality research must be conducted to evaluate systemic innovations to modify payment mechanisms such as capitation in the developing world especially lower and middle income countries. Patient Outcomes Research Teams (PORTs) can play a vital role in standardization of medical practices and reduction of cost variations. Lastly, Knowledge Translation (KT) i.e. conversion of research findings into health policy reforms is essential.



1.         Mercuri M, Gafni A. Medical practice variations: what the literature tells us (or does not) about what are warranted and unwarranted variations. Journal of Evaluation in Clinical Practice.17(4):671-7.

2.         McIntyre D, Thiede M, Dahlgren G, Whitehead M. What are the economic consequences for households of illness and of paying for health care in low-and middle-income country contexts? Social science & medicine (1982). 2006;62(4):858.

3.         Shillcutt SD, Walker DG, Goodman CA, Mills AJ. Cost-effectiveness in low-and middle-income countries: A review of the debates surrounding decision rules. Pharmacoeconomics. 2009;27(11):903.

4.         Folland S, Goodman A, Stano M. Economics of health and health care. 2006.

5.         Henderson JW. Health economics and policy. South-Western Pub.

6.         Block MAG, Mills A. Assessing capacity for health policy and systems research in low and middle income countries*. Health Research Policy and Systems. 2003;1(1):1.

7.         Gilson L, Doherty J, Loewenson R, Francis V. Challenging inequity through health systems. Final report of the Knowledge Network on health systems. 2007.

8.         Bojakowski S, Filer L. Medicines management: An integrated approach? Journal of Management & Marketing in Healthcare. 2009;2(1):102-11.

9.         Eddy DM. Evidence-based medicine: a unified approach. Health affairs. 2005;24(1):9-17.

10.       Goodman DC, Fisher ES, Gittelsohn A, Chang C-H, Fleming C. Why are children hospitalized? The role of non-clinical factors in pediatric hospitalizations. Pediatrics. 1994;93(6):896-902.

11.       Sepucha K, Mulley AG. A perspective on the patient’s role in treatment decisions. Medical Care Research and Review. 2009;66(1 suppl):53S-74S.

12.       Sepucha KR, Fowler FJ, Mulley AG. Policy support for patient-centered care: the need for measurable improvements in decision quality. HEALTH AFFAIRS-MILLWOOD VA THEN BETHESDA MA-. 2004;23.

13.       Wennberg JE. Unwarranted variations in healthcare delivery: implications for academic medical centres. Bmj. 2002;325(7370):961-4.

14.       Wennberg JE. Practice variations and health care reform: connecting the dots. HEALTH AFFAIRS-MILLWOOD VA THEN BETHESDA MA-. 2004;23.

15.       Wennberg JE. Practice variation: implications for our health care system. Managed care (Langhorne, Pa). 2004;13(9 Suppl):3.

16.       Shwartz M, Peköz EA, Labonte A, Heineke J, Restuccia JD. Bringing Responsibility for Small Area Variations in Hospitalization Rates Back to the Hospital: The Propensity to Hospitalize Index and a Test of the Roemer’s Law. Medical Care.49(12):1062.

17.       Lewis M. Informal payments and the financing of health care in developing and transition countries. Health affairs. 2007;26(4):984-97.


19.       Kroneman M, Nagy Jl. Introducing DRG-based financing in Hungary: a study into the relationship between supply of hospital beds and use of these beds under changing institutional circumstances. Health Policy. 2001;55(1):19-36.

20.       Rotter T, Kinsman L, James E, Machotta A, Gothe H, Willis J, et al. Clinical pathways: effects on professional practice, patient outcomes, length of stay and hospital costs. Cochrane Database Syst Rev.3(3).

21.       Cheah TS. The impact of clinical guidelines and clinical pathways on medical practice: effectiveness and medico-legal aspects. ANNALS-ACADEMY OF MEDICINE SINGAPORE. 1998;27:533-9.

About the Author: Hussain Maqbool Ahmed Khuwaja is a student at AKU, Pakistan, studying MSc Health Policy and Management. He graduated BScN from AKU School of Nursing and worked in AKUH for 2 years as registered nurse. He wishes to work for Research and Development, Policy Analysis and Public Health Management in future. He can be reached at [email protected]

About this article: This article is competing for the JPMS International Medical Writing Contest 2013

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