Variations in the use of physician services by Medicare beneficiaries

Variations in the utilization of physicians' services by Medicare enrollees in Michigan are examined in this article. Two measures of market-area utilization are estimated. One is the standard per capita utilization rate, which has been the common focus of many small area variation studies. The second measures the intensity with which physicians treat their patients and can be taken as an indicator of the so-called practice-style phenomenon. The results show that, although substantial intermarket variation in per capita utilization is found, the variations are not as large as one might expect and are considerably less than the variations in per capita utilization for Michigan's Blue Shield population. More important, the relationship between a market's per capita utilization and intensity of care of primary care physicians is insignificant. The relevance of these findings, especially within the context of the practice style hypothesis and policy proposals that would establish physician practice norms, are discussed.