The hospital response to Medicare's Prospective Payment System: an econometric model of Blue Cross and Blue Shield plans

Hospital volume responses to Medicare's Outpatient Prospective Payment System: evidence from Florida

Effective in 2000, Medicare's Outpatient Prospective Payment System (OPPS) sets pre-determined reimbursement rates for hospital outpatient services, replacing the prior cost-based methods of reimbursement. Using Florida outpatient discharge data, we study the effect of OPPS on hospital outpatient volume. We find that on average Medicare rate cuts either decreased or had no significant effect on Medicare volume, but increased private fee-for-service (FFS) volume. We also find that responses vary with the hospital's "exposure" to Medicare payment changes, where exposure is measured as the baseline Medicare patient share. Compared to less exposed hospitals, highly exposed hospitals responded with larger increases in private FFS volume and with smaller decreases (in some cases, even increases) in Medicare volume when payment rates fell. Our results are consistent with provider demand inducement.

Impact of the case payment reimbursement method on the utilization and costs of laparoscopic cholecystectomy

The purpose of this study was to examine the relationship between adoption of case payment for laparoscopic cholecystectomy (LC) and the growth rate of LC, outcomes of patients undergoing LC, and total healthcare expenditures on cholecystectomy. We used the claims data from Bureau of National Health Insurance (BNHI) to identify patients who underwent LC and open cholecystectomy (OC). Data were available from January 1996 to October 1997 and from January 1998 to October 1999, enabling use to compare data from before and after the introduction of the new case payment system. Results showed that the volume and the proportion of LCs increased after adoption of the new payment method. We did not find a sharp increase in the cholecystectomy rate during the study period. In terms of outcomes, the admission rate for emergencies decreased; the surgery mortality rate decreased, but the readmission rate increased. The average cost and length of hospital stay for LC subjects decreased; however, the total cost of cholecystectomy increased. The impact on LC of the introduction of a case payment method failed to reduce total health expenditures for cholecystectomy.

Potential impact of the new medicare prospective payment system on reimbursement for traumatic brain injury inpatient rehabilitation

OBJECTIVE

To evaluate the potential impact of the new Medicare prospective payment system (PPS) on traumatic brain injury (TBI) rehabilitation.

DESIGN

Retrospective cohort study of patients with TBI. Patients were assigned to their appropriate case-mix group (CMG) based on Medicare criteria.

SETTING

Fourteen urban rehabilitation facilities throughout the United States.

PARTICIPANTS

Patients with TBI admitted to inpatient rehabilitation and enrolled in the Traumatic Brain Injury Model Systems from 1998 to 2001 (N=1807).

INTERVENTIONS

Not applicable.

MAIN OUTCOME MEASURES

Cost of inpatient rehabilitation admission, length of stay (LOS), and functional outcomes.

RESULTS

The median cost of inpatient rehabilitation for patients with TBI exceeded median PPS payments for all TBI CMGs by 16%. Only 3 of the 14 hospitals received reimbursement under PPS that exceeded costs for their TBI patients.

CONCLUSIONS

Compared with current costs, the new Medicare payment system may reimburse facilities significantly less than their costs for the treatment of TBI. To maintain their current financial status, facilities may have to reduce LOS and/or reduce resource use. With a decreased LOS, inpatient rehabilitation services will have to improve FIM efficiency or discharge patients with lower discharge FIM scores.

The effect of funding policy on day of week admissions and discharges in hospitals: the cases of Austria and Canada

This paper compares two different funding policies for inpatients, the case-based approach in Austria versus the global budgeting approach in Canada. It examines the impact of these funding policies on length of stay of inpatients as one key measure of health outcome. In our study, six major clinical categories for inpatients are selected in which the day of the week for admission is matched to the particular day of the week of discharge for each individual case. The strategic statistical analysis proves that funding policies have a significant impact on the expected length of stay of inpatients. For all six clinical categories, Austrian inpatients stayed longer in hospitals compared to Canadian inpatients. Moreover, inpatients were not admitted and discharged equally throughout the week. We also statistically prove for certain clinical categories that more inpatients are discharged on certain days such as Mondays or Fridays depending on the funding policy. Our study is unique in the literature and our conclusions indicate that, with the right incentives in place, the length of stay can be decreased and discharge anomalies can be eliminated, which ultimately leads to a decrease in healthcare expenditures and an increase in healthcare effectiveness.

DRG-related prices applied in a public health care system--can Finland learn from Norway and Sweden?

In the early 1990s, DRG based hospital financing was introduced into some hospital districts in Finland. The 1993 state subsidy reform decentralising all hospital financing to municipalities, and the aim of improving productivity, were the driving forces for introducing DRG. This study addresses the pros and cons of DRG in hospital financing in the Finnish health care system and puts forward several solutions to avoid potential problems. We consider the objectives and optimal features of hospital financing systems in the context of the public health care system, where the public sector owns and finances hospitals. We analyse impacts of introducing different types of DRG based hospital financing systems, taking into account earlier experiences in countries such as Sweden and Norway, as well as Finnish system specific features. DRG could assist the Finnish municipalities to compare quality, costs and prices of services between hospitals, and related cost information might help them budget expenditure more accurately. System specific features mean that traditional uses of DRG in hospital pricing are not feasible in Finland. But some benefits of DRG could be exploited, for instance in the controlled contracts between municipalities and hospitals.

Effects of environmental threats on the quality of care in acute care hospitals

This study investigates how environmental threats may adversely affect internal resources (slacks) and how hospitals' slack level may mediate the adverse effect of environmental threats on quality. Two testable hypotheses are (1) The environmental threat and level of organizational slack in hospitals are inversely related; and (2) Hospitals' slack level and quality of care are positively related. Both hypotheses are supported by the data in analysis of the structural relationships among the environmental threat, organizational slack, and quality of care indicators.

Varying health care provider objectives and cost-shifting: the case of retail pharmacy in the US

In this paper we investigate the relationship between health care provider objectives, cost-shifting, and prices by exploring the relationship between state Medicaid pharmacy reimbursements and average prices paid by pharmacy retail customers for four distinct pharmaceutical products across the US in 1994. We develop a more general theory than past researchers to enable provider objectives to vary with Medicaid pharmacy reimbursement levels. We find that provider objectives and the direction of relationship between Medicaid pharmacy reimbursements and retail prices vary with Medicaid pharmacy reimbursement levels. At high Medicaid pharmacy reimbursement levels we find a consistent negative relationship across products. At low Medicaid pharmacy reimbursement levels, the direction of the relationship is product-specific. As a result, policy-makers should be aware that policies affecting reimbursements from government-sponsored health insurance will also affect retail customers that include the uninsured. Paradoxically, for certain products if a state cuts a generous Medicaid reimbursement level this could hurt uninsured patients, whereas cuts in a stingy Medicaid reimbursement rate may help uninsured patients.

Hospital response to the implementation of prospective payment

This research examined the competing effects of regulatory intensity (Prospective Payment System) and inertial pressure on US hospitals' cost of medical materials, shifting of services from inpatient to outpatient settings, size of the administrative component, and use of new technology. Among the expected findings, regulatory intensity was associated with reduced medical material costs, less new technology and a greater administrative component. Inertial pressures were associated with higher medical material costs, more new technology and less shifting of services from inpatient to outpatient settings. It was concluded that US hospitals respond to regulatory pressures within the context of strong inertial forces. The stronger the inertial forces, the less dramatic a hospital's response to regulatory pressures is likely to be.