The relationship between the Balanced Budget Act and length of stay for Medicare patients in US hospitals

Background  The Balanced Budget Act (BBA) of 1997 and Balanced Budget Refinement Act (BBRA) of 1999 led to deep financial cuts for hospitals and nursing homes. Objectives  We examine the effects of these acts on hospital length of stay (LOS) for Medicare recipients. Methods  Using data for all short-stay community hospitals in the country, we compared LOS for Medicare patients before and after the BBA/BBRA relative to known determinants of LOS, e.g., hospital ownership, region, beds, financial performance, and conversion/change in ownership type. Results  Hospital LOS was reduced as a result of the acts. Reductions were more apparent for larger urban hospitals that provided safety-net services. LOS varied slightly by hospital ownership. Conclusion  This study is among the first to evaluate the impact of BBA and BBRA on hospital services. These acts had a negative effect on the ability of hospitals to continue offering safety-net services and negatively affected LOS.      

Using return on equity and total profit margin to evaluate hospital performance in the U.S.: a piecewise regression analysis

We investigated hospital profitability by comparing Total Profit Margin (TPM) and Return on Equity (ROE) as measures of profitability, while controlling for inflation and other salient factors. We controlled for variables such as, Disproportionate Share Hospital status, location, type of ownership control, teaching status, conversion to or from nonprofit status, Critical Access Hospital status, sole Medicare provider status, case mix adjusted patient length of stay, bed size, number of employees, and occupancy rate. We allowed for nonlinearities in our model, and used 1996 and 1998 data in our analysis to bridge potential effects of the Balanced Budget Act of 1997. Most of the hospitals we examined were nonprofit organizations that did not convert their type of ownership control. As a consequence, we found TPM to be a better measure of profitability than ROE, and profitability was mainly influenced by location, size, occupancy rate, volume of Medicare and Medicaid patients, and teaching status. Our results clarify the primary factors associated with profitability for our sample hospitals, and will assist creditors, managers and regulators in their assessments of comparative hospital financial performance.     

Trends in length of stay for Medicare patients: 1979-87

Hospital length of stay (LOS) declined steadily during the 1970s, then rapidly during the early years of the Medicare prospective payment system (PPS). In this article, the authors examine trends in hospital LOS for Medicare patients from 1979 through 1987 for all cases combined, for medical and surgical cases separately, and for different geographic regions. The increase in LOS for surgical cases from 1985 through 1987 represented two offsetting trends. Continuing declines in LOS for most procedures were offset by an increased shift toward complex, long LOS procedures.     

Does severity explain differences in hospital length of stay for pneumonia patients?

OBJECTIVES: In the USA, the role of patient severity in determining hospital resource use has been questioned since Medicare adopted prospective hospital payment based on diagnosis-related groups (DRGs). Exactly how to measure severity, however, remains unclear. We examined whether assessments of severity-adjusted hospital lengths of stay (LOS) varied when different measures were used for severity adjustment. METHODS: The complete study sample included 18,016 patients receiving medical treatment for pneumonia at 105 acute care hospitals. We studied 11 severity measures, nine based on patient demographic and diagnosis and procedure code information and two derived from clinical findings from the medical record. For each severity measure, LOS was regressed on patient age, sex, DRG, and severity score. Analyses were performed on trimmed and untrimmed data. Trimming eliminated cases with LOS more than three standard deviations from the mean on a log scale. RESULTS: The trimmed data set contained 17,976 admissions with a mean (S.D.) LOS of 8.9 (6.1) days. Average LOS ranged from 5.0-11.8 days among the 105 hospitals. Using trimmed data, the 11 severity measures produced R-squared values ranging from 0.098-0.169 for explaining LOS for individual patients. Across all severity measures, predicted average hospital LOS varied much less than the observed LOS, with predicted mean hospital LOS ranging from about 8.4-9.8 days. DISCUSSION: No severity measure explained the two-fold differences among hospitals in average LOS. Other patient characteristics, practice patterns, or institutional factors may cause the wide differences across hospitals in LOS.     

The effects of hospital-physician integration strategies on hospital financial performance.

STUDY QUESTION. This study investigated the longitudinal relations between hospital financial performance outcomes and three hospital-physician integration strategies: physician involvement in hospital governance, hospital ownership by physicians, and the integration of hospital-physician financial relationships. DATA SOURCES AND STUDY SETTING. Using secondary data from the State of California, integration strategies in approximately 300 California short-term acute care hospitals were tracked over a ten-year period (1981-1990). STUDY DESIGN. The study used an archival design. Hospital performance was measured on three dimensions: operational profitability, occupancy, and costs. Thirteen control variables were used in the analyses: market competition, affluence, and rurality; hospital ownership; teaching costs and intensity; multihospital system membership; hospital size; outpatient service mix; patient volume case mix; Medicare and Medicaid intensity; and managed care intensity. DATA COLLECTION/EXTRACTION. Financial and utilization data were obtained from the State of California, which requires annual hospital reports. A series of longitudinal regressions tested the hypotheses. PRINCIPAL FINDINGS. Considerable variation was found in the popularity of the three strategies and their ability to predict hospital performance outcomes. Physician involvement in hospital governance increased modestly from 1981-1990, while ownership and financial integration declined significantly. Physician governance was associated with greater occupancy and higher operating margins, while financial integration was related to lower hospital operating costs. Direct physician ownership, particularly in small hospitals, was associated with lower operating margins and higher costs. Subsample analyses indicate that implementation of the Medicare prospective payment system in 1983 had a major impact on these relationships, especially on the benefits of financial integration. CONCLUSIONS. The findings support the validity of hospital-physician financial integration efforts, and to a lesser extent the involvement of physicians in hospital governance. The results lend considerably less support for strategies built around direct physician ownership in hospitals, particularly since PPS implementation. RELEVANCE/IMPACT. These findings challenge prior studies that found few financial benefits to hospital-physician integration prior to PPS implementation in 1983. The results imply that financial benefits of integration may take several years after implementation to emerge, are most salient in a managed care or managed competition environment, and vary by hospital size and multihospital system membership.     

Ownership conversion and closure in the nursing home industry

Ownership conversions and closures in the nursing home literature have largely been treated as separate issues. This paper studies the predictors of nursing home ownership conversions and closure in a common framework after the implementation of the Prospective Payment System in Medicare skilled nursing facilities. The switch in reimbursement regimes impacted facilities with greater exposure to Medicare and lower efficiency. Facilities that faced greater financial difficulty were more likely to be involved in an ownership conversion or closure, but after controlling for other factors the effect of exposure to Medicare is small. Further, factors that predict conversion were found to vary between not-for-profit and for-profit facilities, while factors that predict closure were the same for each ownership type.     

Inpatient cancer treatment: an analysis of financial and nonfinancial performance measures by hospital-ownership type

This study uses longitudinal data of inpatient treatment from the Agency for Healthcare Research and Quality's (AHRQ's) Healthcare Cost and Utilization Project (HCUP) to examine the differences in historical trends and build future projections of charges, costs, and lengths of stay (LOS) for inpatient treatment of four of the most prevalent cancer types: breast, colon, lung, and prostate. We stratify our data by hospital ownership type and for the aforementioned four major cancer types. We use the Kruskal Wallis (nonparametric ANOVA) Test and time series models to analyze variance and build projections, respectively, for mean charges per discharge, mean costs per discharge, mean LOS per discharge, mean charges per day, and mean costs per day. We find that significant differences exist in both the mean charges per discharge and mean charges per day for breast, colon, lung, and prostate cancers and in the mean LOS per discharge for breast cancer. Additionally, we find that both mean charges and mean costs are forecast to continue increasing while mean LOS are forecast to continue decreasing over the forecast period 2008 to 2012. The methodologies we employ may be used by individual hospital systems, and by health care policy-makers, for various financial planning purposes. Future studies could examine additional financial and nonfinancial variables for these and other cancer types, test for geographic disparities, or focus on procedural-level hospital measures.     

Factors associated with the provision of uncompensated care in Pennsylvania hospitals

Data from 190 Pennsylvania hospitals in 1995 were used in regression analysis of the determinants of uncompensated care and profitability. Uncompensated care as a percentage of operating expenses was negatively related with hospital size and positively associated with obstetrical services emphasis, emergency visit mix, area unemployment rate, and sole community hospital status. Hospital profitability was not associated with uncompensated care; it was negatively associated with HMO penetration, Medicare and Medicaid share of admissions and religious ownership; and it was positively associated with medium size. Pennsylvania hospitals may have been shielded from the financial burdens of uncompensated care by the availability of funds from other sources that may not be available in the future. Consequently, unless new sources of funding are developed or insurance coverage expanded, financial pressures from providing uncompensated care may cause hospitals to face the dilemma of abandoning uninsured patients or risking financial insolvency.     

Impact of Medicare prospective reimbursement system on nutritional support service patients: the importance of pass throughs

The financial data of all patients (535) admitted to the Nutritional Support Service (NSS) during 1985, including charges, true care costs, and actual reimbursement including pass-through payments (which are Medicare funds given directly to hospitals for education and capital equipment, and vary significantly from hospital to hospital), were analyzed. The NSS Medicare patients fell into 98 diagnostic related groups (DRGs). All 3,939 Medicare patients admitted in 1985 with the same DRGs as the NSS patients were also identified and their financial data analyzed. The NSS patients lost $999,643 because of the 266 medicare reimbursed NSS patients sustained high losses which overwhelmed the modest profits of the 269 non-Medicare patients. When data from all Medicare patients (which includes both NSS and non-NSS patients) with the same DRGs are analyzed, large profits are realized. These profits are totally due to pass-through payments received. Without pass throughs the loss for all 3,939 Medicare patients in these 98 DRGs would have been $1,641,273. The impact of eliminating pass throughs in the next few years needs to be determined. NSS patients represent a group that generates high financial losses under the federal prospective reimbursement system. However, present Medicare reimbursement of other less seriously ill patients with similar DRGs more than compensate these losses if pass throughs are used in determining reimbursements.     

Impact of the Medicare Short Stay Transfer Policy on Patients undergoing Major Orthopedic Surgery

Objective. To examine the impact of the Short Stay Transfer Policy (SSTP) on practice patterns.
Data Sources. This study uses data from the Centers for Medicare and Medicaid Services Medicare Provider Analysis and Review (MEDPAR) file, Home Health Standard Analytical File, 1999 Provider of Service file, and data from the 2000 United States Census.
Study Design. An interrupted time-series analysis was used to examine the length of stay (LOS) and probability of "early" discharge to post acute care (PAC).
Data Collection. Separate 100percent samples of all fee-for-service Medicare recipients undergoing either elective joint replacement (JR) surgery or surgical management of hip fracture (FX) between January 1, 1996 and December 31, 2000 were selected.
Principal Findings. Prior to implementation of the SSTP. LOS had been falling by 0.37 and 0.30 days per year for JR and FX patients respectively. After implementation of the SSTP, there was an immediate increase in LOS by 0.20 and 0.17 days, respectively. Thereafter, LOS remained flat. The proportion of patients discharged "early" to PAC had been rising by 4.4 and 2.6 percentage points per year for JR and FX patients respectively, to a peak of 28.8percent and 20.4percent early PAC utilization in September 1998. Immediately after implementation of the SSTP, there was a 4.3 and 3.0 percentage point drop in utilization of "early" PAC. Thereafter utilization of early PAC increased at a much slower rate (for JR) or remained flat (for FX). There was significant regional variation in the magnitude of response to the policy.
Conclusion. Implementation of the SSTP reduced the financial incentive to discharge patients early to PAC. This was accomplished primarily through longer LOS without meaningful change in PAC utilization. With the recent expansion of the SSTP to 29 DRGs (representing 34percent of all discharges), these findings have important implications regarding patient care.     

Hospital Length of Stay for Schizophrenia

Objective: The purpose of this study was 3-fold: (i) to determine the distribution of US patients diagnosed with schizophrenia and requiring a hospitalisation in the calendar year 1988 or 1992, by primary payer type (Medicare; Medicaid; or private insurance); (ii) to discern the mean inpatient length of stay and charge per day in 1988 or 1992, by payer type; and (iii) to test for time trends between 1988 and 1992, for inpatient hospital length of stay and charge per day. Design and setting: A retrospective study using the Healthcare Cost and Utilisation Project (HCUP-3) Nationwide Inpatient Sample (NIS), Release 1, as the database. Patients and participants: The study population was selected from all 1988 and 1992 discharges of patients that were >10 years of age; had an International Classification of Diseases, 9th Revision, Clinical Modification (ICD-9-CM) diagnostic code of 295.00 to 295.95, indicating schizophrenia as the primary diagnosis; were hospitalised between 1 and 40 days; and had Medicare, Medicaid, or private insurance, inclusive of fee-for-service or managed care, identified as the primary source of insurance coverage. The final sample used for this analysis consisted of 22 479 discharges from 1988, and 33 969 discharges from 1992. Main outcome measures and results: After adjusting for potentially confounding factors, the mean hospital length of stay for schizophrenia decreased by over 1 day (from 10.1 to 9.0; p < 0.0001) between 1988 and 1992 among individuals covered by private insurance; whereas the mean hospital length of stay for both Medicare and Medicaid beneficiaries remained unchanged. These findings existed in the presence of a uniform inflationary increase in mean hospital charges per day by payer category. Conclusions: Further research is required to determine whether the observed downward trend in hospital length of stay was a result of private payers enhancing patient care and thereby discharging patients in a more efficient manner, or if patients were discharged prematurely because of financial incentives operating within private insurance programmes.     

Do managerial efficiency and social responsibility drive long-term financial performance of not-for-profit hospitals before acquisition?

Due to steep declines in charitable support and reduced demand for traditional hospital services, economic goals are increasingly important to not-for-profit hospitals. Effects of efficient management and effective pursuit of not-for-profit status (for example, levels of Medicare, indigent patients, and unprofitable services) on financial viability are explored. While previous research compared hospitals of different ownership status, not-for-profit hospital operations before acquisition by for-profit hospital chains are investigated--"neutral ground" relative to ownership. Results suggest minor links between efficiency and long-term profitability despite effectiveness in pursuit of non taxable status.     

The role of profit status under imperfect information: evidence from the treatment patterns of elderly medicare beneficiaries hospitalized for psychiatric diagnoses

Medicare claims for elderly admitted for psychiatric care were used to estimate the impact of hospital profit status on costs, length of stay (LOS), and rehospitalizations. No evidence was found that not-for-profits (NFPs) treated sicker patients or had fewer rehospitalizations. For-profits (FPs) actually treated poorer patients. Longer LOS and lower daily costs of NFPs were attributable to their other characteristics, e.g. medical school affiliation. Instrumental variables (IV) estimates suggested that NFP general hospitals actually have lower adjusted costs. These findings fail to support concerns that FP growth leads to declining access and quality or contentions that NFPs are less efficient.     

Prediction of hospital failure: a post-PPS analysis

This study investigates the ability of discriminant analysis to provide accurate predictions of hospital failure. Using data from the period following the introduction of the Prospective Payment System, we developed discriminant functions for each of two hospital ownership categories: not-for-profit and proprietary. The resulting discriminant models contain six and seven variables, respectively. For each ownership category, the variables represent four major aspects of financial health (liquidity, leverage, profitability, and efficiency) plus county marketshare and length of stay. The proportion of closed hospitals misclassified as open one year before closure does not exceed 0.05 for either ownership type. Our results show that discriminant functions based on a small set of financial and nonfinancial variables provide the capability to predict hospital failure reliably for both not-for-profit and proprietary hospitals.     

Socioeconomic Status of Newborns and Hospital Efficiency: Implications for Hospital Payment Methods

ObjectivesStudies have shown a consistent impact of socioeconomic status at birth for both mother and child; however, no study has looked at its impact on hospital efficiency and financial balance at birth, which could be major if newborns from disadvantaged families have an average length of stay (LOS) longer than other newborns. Our objective was therefore to study the association between socioeconomic status and hospital efficiency and financial balance in that population.MethodsA study was carried out using exhaustive national hospital discharge databases. All live births in a maternity hospital located in mainland France between 2012 and 2014 were included. Socioeconomic status was estimated with an ecological indicator and efficiency by variations in patient LOS compared with different mean national LOS. Financial balance was assessed at the admission level through the ratio of production costs and revenues and at the hospital level by the difference in aggregated revenues and production costs for said hospital. Multivariate regression models studied the association between those indicators and socioeconomic status.ResultsA total of 2 149 454 births were included. LOS was shorter than the national means for less disadvantaged patients and longer for the more disadvantaged patients, which increased when adjusted for gestational age, birth weight, and severity. A 1% increase in disadvantaged patients in a hospital’s case mix significantly increased the probability that the hospital would be in deficit by 2.6%.ConclusionsReforms should be made to hospital payment methods to take into account patient socioeconomic status so as to improve resource allocation efficiency.     

The effect of hospital characteristics and organizational factors on pre- and postoperative lengths of hospital stay.

To determine reasons for variations in length of stay (LOS) for surgical patients, a comprehensive statistical model was specified and estimated using 1978 discharge abstract data from New Jersey. The model distinguished preoperative LOS from postoperative LOS, and analyzed differences in the impacts of each determining factor on each segment of a hospital stay. The model included a large set of control variables, but the focus of discussion in this article is on factors which reflect the preferences, policies, and organizational routines of hospitals. The empirical findings suggest strategies that hospital managers and regulators can use for reducing average LOS. For example, afternoon admissions often result in extra preoperative days of care even after adjusting for severity of illness. Apparent scarcity of posthospital care in New Jersey also seems to translate into longer hospital stays. Using a comprehensive model and a large, reliable data set, the analysis confirms many hypotheses concerning reasons for LOS variation that have been suggested by earlier research. However, the analysis also raises questions concerning the interpretation of other earlier findings.     

Long-term care hospitals under Medicare: facility-level characteristics

Though accounting for only a small percentage of total Medicare spending, long-term care hospitals (LTCHs) (defined as having an average length of stay [LOS] of 25 days or more) have been growing, in number and in Medicare expenditures, at a rapid rate in recent years. Because they have not been widely studied, we conducted research to describe the characteristics of this increasingly important Medicare provider type. We found that most LTCHs specialize in the provision of respiratory care or rehabilitation. Information from this study can help inform the development of a Medicare prospective payment system for LTCHs.     

Ischemic stroke hospital stay and discharge destination

PURPOSE: Stroke hospitalizations are among the most expensive, with a mean length of stay (LOS) higher than other hospitalizations. This retrospective study assesses factors influencing ischemic stroke LOS taking into consideration the discharge destination of patients. METHODS: Linked hospital separation records between July 1995 and December 1999 were extracted to determine the first admission for ischemic stroke in Western Australia. Multiple hospitalization records for the same patient were screened to obtain the total duration of hospitalization. Demographic characteristics, hospital type, and medical history of patients were also retrieved. In the presence of censoring and without prior assumption on the time-to-discharge distribution, the Cox's proportional hazards model was used to assess the factors affecting LOS. RESULTS: During the study period, 6469 patients with a first-ever admission for ischemic stroke were identified, with average LOS being 28 days (95% CI, 26-30 days). Hospital stays were significantly longer for females and patients directly admitted to hospitals maintaining a specialist stroke unit, whereas patients residing in rural areas had shorter stays. CONCLUSIONS: The impact of stroke severity and placement in nursing homes after discharge need to be understood to manage LOS and the cost of acute care. Accurate diagnosis upon initial presentation would benefit both the efficiency of hospitals and the outcomes of rural ischemic stroke patients.     

The influence of institutional characteristics on length of stay for psychiatric patients: A national database study in South Korea

The institutionalization of psychiatric patients has put a tremendous burden on many societies, but few studies have examined the effects of institutional characteristics on patient length of stay (LOS). This paper investigated the association between institutional characteristics and LOS for 160,517 psychiatric patients in South Korea by applying a two-level modeling technique to administrative claims databases covering the entire patient population. Patient LOS, expressed in terms of days, was analyzed by taking account of institutional type, ownership, location, inpatient capacity, staffing, and patient demographics. The characteristics of inpatients were used as control variables and consisted of gender, age, sub-diagnosis, and the type of national health security program. The main findings of this study are: (1) patient LOS was 69% longer at psychiatric hospitals than at tertiary-care hospitals; (2) neither location nor inpatient capacity was associated with LOS; (3) larger staffs reduced LOS; and (4), LOS increased with a higher proportion of male inpatients, inpatients ≥65 years old, or inpatients diagnosed with organic or schizophrenic disorders, possibly through contextual effects. The results of this study suggest that researchers and policy makers could improve their assessment of psychiatric patient LOS and its association with health outcome by taking into account institutional characteristics and using multi-level analyses.     

不同医疗保障制度慢性乙肝患者住院床日数及出院转归影响因素分析

目的：分析不同医疗保障制度下慢性乙肝患者的住院床日数及出院转归的影响因素。方法：在山东省济南市和潍坊市共选择3所县级医院和3所市级医院,每所医院抽取2009年全部出院诊断为＂乙型肝炎＂的病历;采取描述性统计及多元线性回归分析数据。结果：城镇职工医保的各型慢性乙肝患者的平均住院床日数约为城镇居民医保患者的1.6～2.3倍,为新农合患者的1.5～1.9倍。医疗保障类型、医院级别、出院转归及慢性乙肝的分型对住院床日数的影响具有统计学意义;住院床日数影响出院转归。结论和建议：不同医疗保障制度间的待遇差异,导致了患者住院床日数的差异;住院床日数又影响了患者的病情转归。建议缩小和消除不同医疗保障制度间的不平等,保障国民健康权益的公平性。