Since 1965, expenditures for medical care in the United States have increased 10-fold. As a result, corporate outlays for health benefits have skyrocketed. Employers have instituted various cost-containment measures based in part on reports of wide variations in rates of utilization and the assumption that unnecessary or inappropriate utilization of medical care contributes to increasing costs. Frequently, however, employers lack adequate means for identifying sources of variation or for evaluating its appropriateness. In this article, we report on a project in which hospital utilization among several US corporate populations was compared with that for a geographically defined benchmark population to assist employers in the assessment of their rates of utilization and expenditures and to identify specific areas that merit further investigation. Our findings illuminate the difficulties in constructing valid rates from medical-care claims data and emphasize potential biases due to problems of comparability between populations. We also address the potential value of such comparisons for helping corporations identify areas in which cost-containment efforts may be most effective and yet not jeopardize the quality of medical care.
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