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Key Topic Article Abstracts Health plans and providers need to profile current practice patterns to understand better the resources used in managing medical conditions. A profiling system is presented that groups International Classification of Diseases (ICD-9-CM) codes into 125 diagnostic clusters based on clinical homogeneity with respect to physician treatment response. For each diagnostic cluster, diagnostic episode clusters (DECs) are formulated. A DEC links all services incurred in treating a patient's medical condition within a specific period of time. Each DEC is marked with a severity-of-illness, comorbidity, and age indicator. To test the validity of the diagnostic cluster methodology, claims were analyzed from a preferred provider organization (PPO) and an independent practice association (IPA). PPO and IPA DEC charges and utilization were compared with t-tests. Physician practice patterns differed based on patient severity of illness, comorbidities, and age. Both PPO and IPA physicians delivered significantly more resources to patients in higher severity-of-illness categories. PPO physicians generally treated older patients with more resources than younger patients. Patient age did not have the same impact on IPA physicians' practice patterns. IPA physicians' average treatment pattern was about 22% less expensive than that of PPO physicians. IPA physicians decreased average expenses by reducing hospital days by about 73% (P < 0.01) and hospital outpatient visits by about 89% (P < 0.01) compared to the rates of PPO physicians. Ambulatory services among IPA physicians were not significantly higher than rates for PPO physicians. The DEC methodology is a valid approach for profiling patterns of treatment. The style of medicine in the IPA was less hospital intensive and, consequently, less expensive than that practiced by PPO physicians. PPO physicians also had greater practice pattern variations than IPA physicians. This article presents a small-area variation study that examines utilization differences for primary care physicians (PCPs) in treating a homogeneous set of prevalent medical conditions. The study used secondary data collected over a 24-month period from a large, Northeastern region independent practice association. The diagnostic cluster methodology was used to examine geographic differences for PCPs in treating prevalent medical conditions. This methodology groups International Classification of Diseases, 9th revision (ICD-9), codes into diagnostic clusters based on clinical homogeneity with respect to generating a similar clinical response from the physician. For each diagnostic cluster, diagnostic episode clusters (DECs) were formulated. Each DEC links all services incurred in treating a patient's medical condition within a specific period of time. Differences in use rates across small areas were tested using t tests. The data showed little variation in the physician office visit rate across small areas. However, services generated from these office visits exhibited large rate variations. The most significant small-area differences were for hospital inpatient days and surgical procedures. Pattern-of-treatment differences exist across small areas for the homogeneous set of prevalent medical conditions treated by PCPs. For many large physician groups, about 75% of all revenues come from capitation contracts. These groups may reduce the variable expenses of patient care by conducting medical outcome studies. Physician groups will obtain the most benefit for their limited research dollars by focusing outcomes research on prevalent medical conditions. The purpose of this study is to provide a comprehensive analysis of the content of physicians' medical practices. We found that 21 diagnostic clusters defined 70% or more of the episodes treated by primary care physicians. For specialists, no more than eight diagnostic clusters were needed to define the majority of their practices. Outcomes research should initially focus on abdominal pain, acute lower respiratory infections, cataracts, cholelithiasis, congestive heart failure, diabetes mellitus, external abdominal hernias, ischemic heart disease, low back pain, maternity care, menstrual disorders, otitis media, peptic diseases, prostate cancer, psychotic episodes, renal calculi, seizure disorders, and thyroid diseases.
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