Evidence on the efficacy of inpatient spending on Medicare patients

Context: It is widely believed that a significant amount, perhaps as much as 20 to 30 percent, of health care spending in the United States is wasted, despite market forces such as managed care organizations and large, self‐insured firms with a financial incentive to eliminate waste of this magnitude. Methods: This article uses Medicare claims data to study the association between inpatient spending and the thirty‐day mortality of Medicare patients admitted to hospitals between 2001 and 2005 for surgery (general, orthopedic, vascular) and medical conditions (acute myocardial infarction [AMI], congestive heart failure [CHF], stroke, and gastrointestinal bleeding). Findings: Estimates from the analysis indicated that except for AMI patients, a 10 percent increase in inpatient spending was associated with a decrease of between 3.1 and 11.3 percent in thirty‐day mortality, depending on the type of patient. Conclusions: Although some spending may be inefficient, the results suggest that the amount of waste is less than conventionally believed, at least for inpatient care.     

Measuring information technology investment among Canadian academic health sciences centres

Many recent studies have attempted to accurately measure the expenditure by hospitals in the area of new information technology (IT), for example see Leonard 1998 and Pink et al. 2001. This is usually done as an exercise to compare the healthcare sector with other industries that have had much more success in implementing and leveraging their IT investment (Willcocks 1992; Chan 2000). It is normally hoped that such investigation would help explain some of the differences among the various industries and provide insight into where (and how much) future IT spending should occur in healthcare (Leonard 2004). Herein, we present the results from a study of eight Canadian academic health sciences centres that contributed data in order to analyze the amount of information technology spending in their organizations. Specifically, we focus on one specific indicator: the IT spend ratio. This ratio is defined as the percentage of total IT net costs to total hospital net operating costs, and aims to provide a "relative (or percentage) measure of spending" so as to make the comparisons meaningful. One such comparison shows that hospitals spend only 55% of the amount the financial services sector spends.     

Planning equipment acquisitions

As the mire of healthcare reform continues to grow, many providers are developing an insatiable appetite for alternatives to the way they currently do business. For some, solutions come in the form of repackaging the same old stuff. Others have jumped recklessly into every managed, capitated, or reformed idea that has come along. Old-school thinkers are still awaiting government direction. Providers of quality healthcare face increasing demands on their shrinking capital funds. An aging population, indigent care, AIDS patients, medical waste disposal, nursing shortages, declining reimbursement, increasing labor costs, and the federal healthcare reform threat have negatively affected cash flow. Though previous cost-plus reimbursement encouraged wasteful spending, the threat of healthcare reform has already caused providers and suppliers alike to work together to cut costs even without government mandates. The impact has been the closure of over 600 facilities nationwide in the past ten years. More than 70,000 acute care hospital beds have been lost from the US healthcare system. Many healthcare facilities have merged into managed care systems, integrated delivery networks, and regional alliances whose costs can be consolidated and controlled. At the same time, new services and profit centers are also being created to increase revenue. A healthcare moves into alternative care environments--home care, ambulatory care, diagnostic testing--these providers need more capital equipment to serve an increased patient load. Coupled with an aging installed base of technology in the acute care environment, healthcare managers face an ever-growing need for capital equipment and creative financing programs to meet longer payment options.(ABSTRACT TRUNCATED AT 250 WORDS)     

Palliative care consultation teams cut hospital costs for Medicaid beneficiaries

Patients facing serious or life-threatening illnesses account for a disproportionately large share of Medicaid spending. We examined 2004-07 data to determine the effect on hospital costs of palliative care team consultations for patients enrolled in Medicaid at four New York State hospitals. On average, patients who received palliative care incurred $6,900 less in hospital costs during a given admission than a matched group of patients who received usual care. These reductions included $4,098 in hospital costs per admission for patients discharged alive, and $7,563 for patients who died in the hospital. Consistent with the goals of a majority of patients and their families, palliative care recipients spent less time in intensive care, were less likely to die in intensive care units, and were more likely to receive hospice referrals than the matched usual care patients. We estimate that the reductions in Medicaid hospital spending in New York State could eventually range from $84 million to $252 million annually (assuming that 2 percent and 6 percent of Medicaid patients discharged from the hospital received palliative care, respectively), if every hospital with 150 or more beds had a fully operational palliative care consultation team.     

The missing technology

This article explores human capital investment to understand cross-sectional variation and differences in growth of health spending among the US, Australia and Canada. Using a human capital model developed by Mincer, the article examines how rate of return to schooling and years of schooling impact wage rate levels in healthcare. The model is extended to approximate the probable trajectory of healthcare wage rate growth and thus the impact on health spending. The results suggest that a higher rate of return to schooling and a more educated healthcare workforce in the US may contribute to higher healthcare wage rates and thus contribute to higher health spending levels than in Canada and Australia. The results also suggest that average healthcare wage rates are growing at the rate of potential GDP; healthcare wage rates are not driving the growth of health spending.     

QUALITY–QUANTITY DECOMPOSITION OF INCOME ELASTICITY OF U.S. HOSPITAL CARE EXPENDITURE USING STATE‐LEVEL PANEL DATA

Economic theory suggests that income growth could lead to changes in consumption quantity and quality as the spending on a commodity changes. Similarly, the volume and quality of healthcare consumption could rise with incomes because of demographic changes, usage of innovative medical technologies, and other factors. Hospital healthcare spending is the largest component of aggregate US healthcare expenditures. The novel contribution of our paper is estimating and decomposing the income elasticity of hospital care expenditures (HOCEXP) into its quantity and quality components. By using a 1999–2008 panel dataset of the 50 US states, results from the seemingly unrelated regressions model estimation reveal the income elasticity of HOCEXP to be 0.427 (std. error = 0.044), with about 0.391 (calculated std. error = 0.044) arising from care quality improvements and 0.035 (std. error = 0.050) emanating from the rise in usage volume. Our novel research findings suggest the following: (i) the quantity part of hospital expenditure is inelastic to income change; (ii) almost the entire income‐induced rise in hospital expenditure comes from care quality changes; and (iii) the 0.427 income elasticity of HOCEXP, the largest component of total US healthcare expenditure, makes hospital care a normal commodity and a much stronger technical necessity than aggregate healthcare. Policy implications are discussed. Copyright © 2013 John Wiley & Sons, Ltd.     

Higher Medicare SNF Care Utilization by Dual-Eligible Beneficiaries: Can Medicaid Long-Term Care Policies Be the Answer?

Objective

To examine outcomes associated with dual eligibility (Medicare and Medicaid) of patients who are admitted to skilled nursing facility (SNF) care and whether differences in outcomes are related to states'' Medicaid long-term care policies.

Data Sources/Collection

We used national Medicare enrollment data and claims, and the Minimum Data Set for 890,922 community-residing Medicare fee-for-service beneficiaries who were discharged to an SNF from a general hospital between July 2008 and June 2009.

Study Design

We estimated the effect of dual eligibility on the likelihood of 30-day rehospitalization, becoming a long-stay nursing home resident, and 180-day survival while controlling for clinical, demographic, socio-economic, residential neighborhood characteristics, and SNF-fixed effects. We estimated the differences in outcomes by dual eligibility status separately for each state and showed their relationship with state policies: the average Medicaid payment rate; presence of nursing home certificate-of-need (CON) laws; and Medicaid home and community-based services (HCBS) spending.

Principal Findings

Dual-eligible patients are equally likely to experience 30-day rehospitalization, 12 percentage points more likely to become long-stay residents, and 2 percentage points more likely to survive 180 days compared to Medicare-only patients. This longer survival can be attributed to longer nursing home length of stay. While higher HCBS spending reduces the length-of-stay gap without affecting the survival gap, presence of CON laws reduces both the length-of-stay and survival gaps.

Conclusions

Dual eligibles utilize more SNF care and experience higher survival rates than comparable Medicare-only patients. Higher HCBS spending may reduce the longer SNF length of stay of dual eligibles without increasing mortality and may save money for both Medicare and Medicaid.     

Organizational and Market Dynamics Associated with Usable,Accessible Health Information Exchange for Skilled Nursing Facilities

Information discontinuity between hospitals and skilled nursing facilities (SNFs) is a critical barrier to safe and effective transitions. To engage effectively in information sharing, SNFs need structural health information exchange (HIE) capabilities but also HIE design and workflows that result in electronic information actually being accessible and usable at the point of care. We use nationally representative SNF data to identify key facility characteristics, and characteristics of the facility’s top hospital referral partner, that are associated with likelihood of SNFs having access to electronic information sharing tools. Controlling for those capabilities, we then assess the extent to which those same characteristics influence the extent to which the SNF reports usable information received electronically that is actually available at the point of care. We conducted pooled, cross-sectional survey data analyses. We identified our sample of SNFs through the Office of the National Coordinator SNF Health IT Survey (2016-2017). From this survey, we generated our SNF HIE capability metric (ability to electronically query for or receive patient information from outside sources) as well as our key study outcome—whether SNFs report usable electronic information from outside sources available at the point of care. Organizational SNF characteristics were pulled from the SK&A Nursing Home datafile as well as the CMS Nursing Home Public Use file. We matched each SNF to the hospital responsible for sending the highest percent of their referrals using Medicare referral pattern data and used these same data to calculate a measure of SNF referral relationship concentration. We then, for each partner hospital, used the American Hospital Association (AHA) IT Supplement to identify general and SNF-specific HIE capabilities. We use linear probability models to estimate the association between relevant organizational characteristics (of the SNF and partner hospital) and both HIE outcomes: (1) SNF HIE capabilities and (2) SNF self-reported availability of usable and accessible outside information at the point of care (controlling for HIE capabilities). Nationally representative sample of skilled nursing facilities (N = 1,189). Controlling for the presence of an EHR, SNFs are more likely to electronically query for or receive information from outside sources if they are large (+10.3%, top tertile compared to bottom; P = .004), if they are part of a large chain (+11.7%, member of 70+ nursing home chain, compared to standalone; P = .001), and if their partnering hospital reports having a health information portal (+7.5%; P = .049). Adjusting for SNF HIE capabilities, SNFs have a higher probability of usable electronic information available at the point of care if their top partner hospital reports participation in a community HIO (+7.6%; P = .018). Hospital information portals increase SNF access to HIE infrastructure, but community-level HIOs increase the likelihood that SNFs actually have accessible, usable electronic information from hospitals at the point of care. Community HIOs appear to play a critical role in SNFs having usable, timely access to outside sources of health information. HIOs have significant opportunity to bolster their value proposition through greater engagement with SNFs and other postacute providers on supporting their informational needs and transitional care processes with hospitals. Office of the National Coordinator for Health IT.     

A comparison of quality of care indicators in urban acute care hospitals and rural critical access hospitals in the United States.

OBJECTIVE: Two recent Institute of Medicine reports highlight that the quality of healthcare in the US is less than what should be expected from the world's most extensive and expensive healthcare system. This may be especially true for critical access hospitals since these smaller rural-based hospitals often have fewer resources and less funding than larger urban hospitals. The purpose of this paper was to compare quality of hospital care provided in urban acute care hospitals to that provided in rural critical access hospitals. DESIGN: Cross-sectional study analyzing secondary Hospital Compare data. T-test statistics were computed on weighted data to ascertain if differences were statistically significant (P=0.01). SETTING: Centers for Medicare and Medicaid Services hospitals. PARTICIPANTS: US Acute Care and Critical Access hospitals. MAIN OUTCOME MEASURES: Differences between urban acute care hospitals and rural critical access hospitals on quality care indicators related to acute myocardial infarction, heart failure and pneumonia. RESULTS: For 8 of the 12 hospital quality indicators the differences between urban acute care and rural critical access hospitals were statistically significant (P=0.01). In seven instances these differences favored urban hospitals. One indicator related to pneumonia favored rural hospitals CONCLUSIONS: Although this study focused on only three disease states, these are among the most common clinical conditions encountered in inpatient settings. The findings suggested that there may be differences in quality in rural critical access hospitals and urban acute care hospitals and support the need for future studies addressing disparities between urban acute care and rural critical access hospitals.     

A note on the trade‐off between waiting times and quality in a constrained hospital market

While aging population and technological innovation are expected to increase healthcare demand in the future, increase in healthcare spending is not likely to be sustainable in times of fiscal constraint. This might lead to a tightening of hospital capacity and, potentially, to higher patient waiting times. This paper studies waiting times and quality in a healthcare market where semi‐altruistic hospitals operate at full capacity. We show that in this context a trade‐off between waiting times and quality emerges which, if hospitals dislike patients to wait, decreases the incentive for the quality of care. We also show that, when hospitals operate at full capacity, standard waiting time policies involving targets and penalties (e.g., “Targets and Terror” in England) can meet the target at the expense of a lower quality of care, with relevant implications for the empirical evaluation of waiting time policy.     

A province-wide study of the association between hospital resource allocation and length of stay.

The relationship between hospital resource allocation and clinical efficiency is poorly understood. Within the single-payer healthcare system in Ontario, Canada, the association between hospital spending patterns and length of stay was studied using data from 1117090 patient discharges in 1997/8 at 162 of 171 acute care hospitals. A weighted regression model was created using an overall hospital length of stay index (actual length of stay divided by predicted length of stay) as the dependent variable. Control variables included: hospital size, teaching activity, occupancy rate, rural location and geographic region. Four independent spending variables were defined as a percentage of total hospital spending: nursing, ambulatory care, administration and support, and diagnostics and therapeutics. The reduced regression model had an r-squared of 0.45. Across all spending variables, hospitals spending relatively too little or too much had significantly longer length of stay. Hospitals' overall pattern of resource allocation was also significantly associated with length of stay. Thus, measurable clinical effects can be seen with resource allocation decisions made by hospital management, supporting the need for rigorous decision-making processes. Future research should focus on exploring the nature of this relationship and the potential interdependencies among hospital services that cause this effect.     

Vertical integration and optimal reimbursement policy

Health care providers may vertically integrate not only to facilitate coordination of care, but also for strategic reasons that may not be in patients’ best interests. Optimal Medicare reimbursement policy depends upon the extent to which each of these explanations is correct. To investigate, we compare the consequences of the 1997 adoption of prospective payment for skilled nursing facilities (SNF PPS) in geographic areas with high versus low levels of hospital/SNF integration. We find that SNF PPS decreased spending more in high integration areas, with no measurable consequences for patient health outcomes. Our findings suggest that integrated providers should face higher-powered reimbursement incentives, i.e., less cost-sharing. More generally, we conclude that purchasers of health services (and other services subject to agency problems) should consider the organizational form of their suppliers when choosing a reimbursement mechanism.     

Heart disease and hospital deaths: an empirical study.

This study examines the effects of selected characteristics of hospitals and physicians on the mortality rates of heart patients who survive their first day in the hospital. Separate multivariate regression analyses are conducted for three groups: (1) patients who undergo a direct heart revascularization or coronary artery bypass graft (CABG) operation; (2) patients who undergo a cardiac catheterization and do not undergo a CABG operation; and (3) patients with a principal diagnosis of acute myocardial infarction (AMI) who do not undergo surgery. The number of patients in each group treated by specific physicians, and the number treated in specific hospitals, measure provider experience with similar patients. Other hypothesized determinants of in-hospital mortality include: (1) patient severity of illness, age, sex, and the presence of comorbidities; (2) hospital ownership, size, location, teaching status, resources expended, and the presence of a coronary care unit; and (3) board certification status of the attending physician or surgeon who operated. Empirical results show that presence of a coronary care unit decreases the chance that CABG patients will die in the hospital but is not significant for other heart patients included in this study. Patients with atherosclerosis who receive a CABG or a cardiac catheterization procedure are more likely to survive in hospitals with high volumes of these procedures. However, hospital volume of AMI admissions was not a factor in survival; AMI patients are more likely to survive when their attending physicians treat high volumes of AMI patients. Also, AMI patients whose physicians are board certified in family practice or in internal medicine are less likely to die compared to AMI patients with physicians not board certified. Similarly, AMI patients hospitalized in teaching facilities are less likely to die compared to AMI patients in hospitals not affiliated with a medical school.     

Healthcare pay: belts tighten--but who feels the squeeze?

A CEO of a renowned acute care facility echoes what many in the healthcare industry are experiencing: "At no time in my memory are we changing so much so fast ... with so little time in which to make changes." The once mighty fortress of the healthcare industry has been invaded by a Trojan horse: managed care. Consequently, managed care has become the primary impetus for industry change. Managed care penetration has increased dramatically over the past few years, and all indications point to its continued growth throughout the US. In 1995, 71% of employees covered under an employer-sponsored health plan received their care through a managed care arrangement (health maintenance organization, preferred provider organization, point of service plan) and only 29% were covered under a traditional indemnity plan. In contrast, 52% of employees had indemnity plans in 1992. Managed care is growing in the public sector as well. Government-sponsored programs such as Medicare and Medicaid increasingly rely on managed care to help control costs and utilization. Though Medicare managed care enrollment today represents only about 10% of the Medicare population, enrollment has more than doubled between 1990 and 1995. Almost every state has some form of Medicaid managed care program in place. Fifteen states have received waivers to mandate that recipients receive care through managed care arrangements, and an additional ten states await federal approval to do the same. Between the years 1993-95, the number of Medicaid beneficiaries enrolled in managed care plans increased 140% to a national enrollment of close to 12 million. In addition to factors in the healthcare field such as uncompensated care, increased outpatient services, excess bed capacity, and restrictions in government reimbursement, the shift to managed care has forced hospitals to find new ways to operate within the healthcare delivery system. In particular, because hospitals' human resource costs are a substantial portion of their budgets, compensation policies are an important component of managing the cost of day-to-day operations. The 1996 Coopers & Lybrand Compensation in the Healthcare Industry Survey summarizes the responses from 207 healthcare organizations, primarily hospitals, in terms of their efforts to survive this constantly changing environment. Respondents included acute care and specialty hospitals, community-based hospitals, academic medical centers, public, and private organizations. The survey addresses operational issues, compensation incentives, special pay, and other compensation-related programs. This article analyzes the results of the Coopers & Lybrand survey.     

An analysis of whether higher health care spending in the United States versus Europe is 'worth it' in the case of cancer

The United States spends more on health care than other developed countries, but some argue that US patients do not derive sufficient benefit from this extra spending. We studied whether higher US cancer care costs, compared with those of ten European countries, were "worth it" by looking at the survival differences for cancer patients in these countries compared to the relative costs of cancer care. We found that US cancer patients experienced greater survival gains than their European counterparts; even after considering higher US costs, this investment generated $598 billion of additional value for US patients who were diagnosed with cancer between 1983 and 1999. The value of that additional survival gain was highest for prostate cancer patients ($627 billion) and breast cancer patients ($173 billion). These findings do not appear to have been driven solely by earlier diagnosis. Our study suggests that the higher-cost US system of cancer care delivery may be worth it, although further research is required to determine what specific tools or treatments are driving improved cancer survival in the United States.     

Patient satisfaction: how patient health conditions influence their satisfaction

With increasing emphasis in healthcare on patient satisfaction, many patient satisfaction studies have been administered. Most assume that all patients combine their healthcare experiences (such as nursing care, physician care, etc.) in the same way to arrive at their satisfaction; however, no research has been conducted prior to the present study to investigate how patients' health conditions influence the way they combine their healthcare experiences. This study aims to determine how seriously ill patients differ from less seriously ill patients during their combining process. Data were collected from five large hospitals in the St. Louis area by administering a patient satisfaction questionnaire. Multiple linear regression analyses with a scatter term, a severity measure, and interaction effects of the severity measure were conducted while controlling for age, gender, and race. Two models (overall quality of care and willingness to recommend to others) were analyzed, and the severity of illness variable revealed interaction effects with physician care, staff care, food, and scatter term variables in the willingness to recommend model (six attributes were analyzed: admission process, nursing care, physician care, staff care, food, and room). With more seriously ill patients, physician care becomes more important and staff care becomes less important, and seriously ill patients are proportionately more likely to combine their attribute reactions only in the willingness to recommend model. All six attributes are not equally influential. Nursing care and staff care show consistent influence in both models. These findings show that if healthcare managers want to increase their patient satisfaction, they should enhance nursing care and staff care first to experience the most improvement.     

Charity care: are hospitals giving their fair share?

How much are hospitals spending on charity care? Overall, they spend far less of their money--about 1% to 2% of annual revenues--on true charity-care cases than the industry would like everyone to believe. The debate over charity care has been muddied by inconsistent definitions of charity care, conflicting requirements from government agencies and misleading data from hospitals.     

A systematic method of accountability. Sound policies allow facilities to account for the level of charity care they provide

Charity care policies can help hospitals accurately determine, define, and account for the level of charity care they provide. This information will help hospitals budget appropriately and measure trends that will ultimately affect the organization's viability. State governments, the federal government, and the Internal Revenue Service are more closely scrutinizing not-for-profit hospitals' tax-exempt status. As a result, the American Institute of Certified Public Accountants (AICPA) has revised its requirement to report on charity care. To meet the AICPA's requirement, healthcare providers must develop their own definition of charity and determine criteria for providing care free or at a reduced rate. Setting policies to support the organization's definition of charity is necessary for the development of internal systems that promote the early identification of individuals seeking healthcare who will be unable to pay for services. Several policy implications may result from the facility's charity care determination process. For example, patients exhibiting extreme hardship might still be eligible to receive charity care even though their income and assets exceed the hospital's income guidelines. An organization planning to develop a charity care policy must first thoroughly assess its current charity care practices and cost accounting capabilities. Obtaining input from all the departments involved in the development of the charity care policy is necessary to make the transition as smooth as possible.     

Waste in the U.S. Health Care System: A Conceptual Framework

Context: Health care costs in the United States are much higher than those in industrial countries with similar or better health system performance. Wasteful spending has many undesirable consequences that could be alleviated through waste reduction. This article proposes a conceptual framework to guide researchers and policymakers in evaluating waste, implementing waste‐reduction strategies, and reducing the burden of unnecessary health care spending. Methods: This article divides health care waste into administrative, operational, and clinical waste and provides an overview of each. It explains how researchers have used both high‐level and sector‐ or procedure‐specific comparisons to quantify such waste, and it discusses examples and challenges in both waste measurement and waste reduction. Findings: Waste is caused by factors such as health insurance and medical uncertainties that encourage the production of inefficient and low‐value services. Various efforts to reduce such waste have encountered challenges, such as the high costs of initial investment, unintended administrative complexities, and trade‐offs among patients', payers', and providers' interests. While categorizing waste may help identify and measure general types and sources of waste, successful reduction strategies must integrate the administrative, operational, and clinical components of care, and proceed by identifying goals, changing systemic incentives, and making specific process improvements. Conclusions: Classifying, identifying, and measuring waste elucidate its causes, clarify systemic goals, and specify potential health care reforms that—by improving the market for health insurance and health care—will generate incentives for better efficiency and thus ultimately decrease waste in the U.S. health care system.     

Do urgent care centers reduce Medicare spending?

We ask how urgent care centers (UCCs) impact healthcare costs and utilization among nearby Medicare beneficiaries. When residents of a zip code are first served by a UCC, total Medicare spending rises while mortality remains flat. In the sixth year after entry, 4.2% of the Medicare beneficiaries in a zip code that is served use a UCC, and the average per-capita annual Medicare spending in the zip code increases by $268, implying an incremental spending increase of $6,335 for each new UCC user. UCC entry is also associated with a significant increase in hospital stays and increased hospital spending accounts for half of the total increase in annual spending. These results raise the possibility that, on balance, UCCs increase costs by steering patients to hospitals.