Anecdotal reports suggest that substantial variation exists in private insurers’ payments for physician services, but systematic evidence is lacking. Using a retrospective analysis of insurance claims for routine office visits, consultations, and preventive visits from more than forty million physician claims in 2007, we examined variations in private payments to physicians and the extent to which variation is explained by patients’ and physicians’ characteristics and by geographic region. We found much variation in payments for these routine evaluation and management services. Physicians at the high end of the payment distribution were generally paid more than twice what physicians at the low end were paid for the same service. Little variation was explained by patients’ age or sex, physicians’ specialty, place of service, whether the physician was a “network provider,” or type of plan, although about one-third of the variation was associated with the geographic area of the practice. Interventions that promote more price-consciousness on the part of patients could help reduce health care spending, but more data on the specific causes of price variation are needed to determine appropriate policy responses.
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