Benchmarking physician practice patterns with data envelopment analysis: A multi-stage approach for cost containment

Physician practice patterns in a Health Maintenance Organization (HMO) are analyzed using single and multi-stage applications of Data Envelopment Analysis (DEA). Best practice (BP) patterns are identified, which can serve as benchmark targets for inefficient physicians. Results suggest three health policy-resource utilization control strategies: (1) If managed care organizations could motivate primary care physicians to adopt the practice styles of the best practice primary care physicians, substantial clinical resource savings could be achieved, ranging from 12% to over 30% in the HMO that is the focus of this study; (2) some specialists who practice as primary care physicians (PCPs) provide more efficient care than some general practitioner PCPs, modifying the current perception that reducing specialists is the most effective way to achieve low cost practice patterns; and (3) groups of physicians in the HMO exhibit different resource use patterns, which may present opportunities to manage high cost groups as another path to contain costs. The results suggest specific new paths which may prove effective at reducing health care costs within managed care organizations, the health care providers most likely to dominate the U.S. health system in the future. A multi-stage DEA technique is used to locate specific types of inefficient physicians. Methods to test the clinical viability of using DEA to realize the potential cost savings and extensions of this research are discussed.