Sources of Geographic Variation in Health Care: Evidence from Patient Migration Online Appendix

Following standard practice in the literature, we construct our health care utilization measure by aggregating care provided to Medicare beneficiaries as recorded in the inpatient, outpatient, and carrier claims data. The inpatient file records payments to inpatient hospital providers (such as hospitals), the outpatient file records payments to institutional outpatient providers (such as hospital outpatient departments), and the carrier file records payments to physicians and other non-institutional providers (such as independent ambulance providers). Following the methodology of Gottlieb et al. (2010),1 we transform the claims (spending) data in these files into a quantity-based measure of utilization that is stripped of geographic variation in Medicare prices. This section describes our approach. The price adjustment procedures of Gottlieb et al. (2010) are specific to the types of claims examined, so we separately describe our price adjustment procedure for inpatient, outpatient, and carrier claims. Our measure of health care utilization excludes several dimensions of care, including durable medical equipment, home health agency care, hospice care, skilled nursing facility care, inpatient rehabilitation facility care, and claims filed through Medicare Part D (prescription drug coverage). Recent work (Newhouse and Garber 2013) has suggested there is substantial variation in these additional measures of care.