Geographic variations in Medicare payments can be largely explained by how much skilled nursing and post-acute care is being used, according to a recently released interim report from the Institute of Medicine.

The Department of Health and Human Services requested the report in 2010, at the urging of lawmakers considering a “geographic value index” for Medicare payments. The index idea came from data showing some states, such as Florida, receive substantially more Medicare dollars than other states, such as Wisconsin. Policymakers suspected the higher payments may be linked to fraud and abuse, and they proposed paying less to Medicare providers in the high-spending areas.

But after studying data from the nation’s 306 hospital-referral regions, the IOM researchers said it’s difficult to pin down reasons for the geographic differences in Medicare spending. Even within regions, there is significant variation among providers, they stated in the report, which was released Friday. However, beneficiaries’ use of skilled nursing homes, hospice and other post-acute care appears to account for about 40% of the difference between high- and low-spending areas, according to the report.

“Because post-acute care, particularly home health and skilled nursing, is a major source of unexplained variation in Medicare spending, reforms that address incentives to overuse post-acute care, including fraud in that use, could have a large effect on healthcare efficiency,” the report authors wrote.

The researchers concluded there isn’t a need for the geographic payment method, saying this would punish high-quality, efficient providers in high-paying areas. Instead, Medicare payments should reward or penalize individual providers rather than lumping providers together based on their proximity to each other, they recommended.

A report on geographic differences in Medicaid payments will be released as part of a final report this summer, according to IOM.