A statistical analysis of the Medicare hospital routine nursing salary cost differential.

From July 1971 (but effective retroactively to July 1, 1969) to October 1981, Medicare hospital reimbursement methods assumed that patients in the qualifying categories of the aged, pediatric, maternal, and kidney transplant cases consumed 8.5 percent more routine nursing resources than patients outside these categories. Consequently, the Medicare program paid this nursing differential to hospitals for all its hospitalized beneficiaries in these categories. The purpose of this study is to investigate whether hospitals with more qualifying Medicare patients do, in fact, have higher per diem routine nursing salary costs. This study tests this hypothesis while attempting to hold constant the influences of other factors such as local area wages, hospital size, occupancy rate, type of control, and geographic region. Using 1979 data from over 4,500 hospitals, and 1977, 1978, and 1979 data from a sample of 1200 hospitals, this study looks at the relationship between per diem hospital routine nursing salary costs and the proportion of qualifying Medicare routine patient days in two models. Model I incorporates the framework of the Section 223 routine cost limits and Model II incorporates a comprehensive set of variables representing the hospitals' production and output characteristics. The evidence from this study provides little empirical basis to support the existence of a strong or sizeable relationship and, hence, does not support payment of the Medicare routine nursing salary cost differential.     

Medicare Advantage Chronic Special Needs Plan boosted primary care, reduced hospital use among diabetes patients

The Affordable Care Act of 2010 authorized the continued availability of Medicare Advantage Chronic Condition Special Needs Plans (C-SNPs). This case study examines the model of care used by the largest such plan, Care Improvement Plus, and compares utilization rates among its diabetes patients with those of other beneficiaries enrolled in fee-for-service Medicare in the same five states. This special-needs plan emphasizes direct contacts with patients to help identify gaps in care and promote primary and preventive health care. The comparative analysis indicates that people with diabetes in the special-needs plan-particularly nonwhite beneficiaries-had lower rates of hospitalization and readmission than their peers in fee-for-service Medicare. For example, risk-adjusted hospital days per enrollee among special-needs plan participants were 19 percent lower than for fee-for-service Medicare enrollees (27 percent lower for nonwhite enrollees). Risk-adjusted physician office visits were 7 percent higher among C-SNP enrollees than among comparable fee-for-service enrollees (26 percent higher for nonwhite enrollees). Although this study does not include a cost analysis, we believe that savings from reduced hospitalizations are likely to more than offset the additional costs of enhanced primary care programs. Our study suggests that the Centers for Medicare and Medicaid Services may be able to adapt methods used by the C-SNP program to improve care and outcomes for beneficiaries with a broad range of chronic diseases.     

Payer-provider collaboration in accountable care reduced use and improved quality in maine medicare advantage plan

Patient-centered, accountable care has garnered increased attention with the passage of the Affordable Care Act and new Medicare regulations. This case study examines a care model jointly developed by a provider and a payer that approximates an accountable care organization for a Medicare Advantage population. The collaboration between Aetna and NovaHealth, an independent physician association based in Portland, Maine, focused on shared data, financial incentives, and care management to improve health outcomes for approximately 750 Medicare Advantage members. The patient population in the pilot program had 50?percent fewer hospital days per 1,000 patients, 45?percent fewer admissions, and 56?percent fewer readmissions than statewide unmanaged Medicare populations. NovaHealth's total per member per month costs across all cost categories for its Aetna Medicare Advantage members were 16.5?percent to 33?percent lower than costs for members not in this provider organization. Clinical quality metrics for diabetes, ischemic vascular disease, annual office visits, and postdischarge follow-up for patients in the program were consistently high. The experience of developing and implementing this collaborative care model suggests that several components are key, including robust data sharing and information systems that support it, analytical support, care management and coordination, and joint strategic planning with close provider-payer collaboration.     

Functional health measure for adjusting health maintenance organization capitation rates.

Because of increasing interest in at-risk enrollment of Medicare beneficiaries by health maintenance organizations, a number of modifications to the adjusted average per capita cost (AAPCC) formula employed by the Health Care Financing Administration have been proposed recently. Researchers have found that new models, which include measures of prior years' utilization and costs, predict Medicare payments significantly better than does the purely demographic formula currently used. In this article, we show that inclusion of instrumental activities of daily living (IADL), a measure of beneficiaries' functional health status, can further improve AAPCC models that already incorporate measures of previous-period utilization and costs. Various models for predicting Medicare payments were examined and compared using survey data and Medicare claims for a random sample of 1,934 beneficiaries. For these models, explained variation in subsequent Medicare payments (as indicated by R2 values) increased considerably when the IADL variable was included. Although actuarial concerns are associated with inclusion of the IADL score in the AAPCC, use of this measure is likely to offset other, possibly more serious, actuarial problems associated with including measures of previous utilization and costs.     

A Financial Ratio Analysis of For-Profit and Non-Profit Rural Referral Centers

ABSTRACT:  Context: National financial data show that rural referral center (RRC) hospitals have performed well financially. RRC hospitals' median cash flow margin ratio was 10.04% in 2002 and grew to 11.04% in 2004. Purpose: The aim of this study is to compare the ratio analysis of key operational and financial performance measures of for-profit RRCs to those of private, non-profit RRCs. Methods: To control for accounting aberrations within a given year, we selected RRCs that reported 3 consecutive fiscal years of Centers for Medicare and Medicaid Services (CMS) cost report data, starting with fiscal year 2004 and ending with fiscal year 2006. Given a limited sample size of 28 for-profit RRCs and 127 non-profits, we used the non-parametric median test to assess median differences in operational and key financial measures between the 2 groups. Findings: For-profit RRCs treated less complex cases and reported fewer discharges per bed and fewer occupied beds than did non-profits. However, for-profit RRCs staffed their beds with fewer full-time-equivalent (FTE) personnel and served a higher proportion of Medicaid patients. For-profit RRCs generated operating cash flow margins in excess of 19%, compared to only 8.1% for non-profits, and maintained newer plant and equipment. Conclusion: For-profit RRCs generated a substantially higher cash flow margin by controlling their operating costs.     

Hospitals respond to Medicare payment shortfalls by both shifting costs and cutting them, based on market concentration

The coverage expansions planned under the Affordable Care Act are to be financed in part by slowing Medicare payment updates to hospitals, thereby reigniting the debate over whether low prices paid by public payers cause hospitals to increase prices to private insurers--a practice known as cost shifting. Recently, the Medicare Payment Advisory Commission (MedPAC) proposed an alternative explanation of hospital pricing and profitability that could be used to support policies that pressure hospitals to reduce overall costs rather than to only raise prices. This study evaluated the cost-shift and MedPAC perspectives using 2008 data on hospital margins for 30,514 Medicare and privately insured patients undergoing any of seven major procedures in markets where robust hospital competition exists and in markets where hospital care is concentrated in the hands of a few providers. The study presents empirical evidence that, faced with shortfalls between Medicare payments and projected costs, hospitals in concentrated markets focus on raising prices to private insurers, while hospitals in competitive markets focus on cutting costs. Policy makers need to examine whether efforts to promote clinical coordination through provider integration may interfere with efforts to restrain overall health care cost growth by restraining Medicare payment rates.     

Among dual eligibles, identifying the highest-cost individuals could help in crafting more targeted and effective responses

The nearly nine million people who receive Medicare and Medicaid benefits, known as dual eligibles, constitute one of the nation's most vulnerable and costly populations. Several initiatives authorized by the Affordable Care Act are intended to improve the health care delivered to dual eligibles and, at the same time, to achieve greater control of spending growth for the two government programs. We examined the 2007 costs and service use associated with dual eligibles. Although the population is indeed costly, we found nearly 40 percent of dual eligibles had lower average per capita spending than non-dual-eligible Medicare beneficiaries. In addition, we found that about 20 percent of dual eligibles accounted for more than 60 percent of combined Medicaid and Medicare spending on the dual-eligible population. But even among these high-cost dual eligibles, we found subgroups. For example, fewer than 1 percent of dual eligibles were in high-cost categories for both Medicare and Medicaid. These findings suggest that decision makers should tailor reform initiatives to account for subpopulations of dual eligibles, their costs, and their service use.     

Are rural referral centers as costly as urban hospitals?

This article evaluates the claim that rural referral centers (RRCs), identified by HCFA criteria for special treatment under Medicare's prospective payment system, have average costs similar to urban hospitals. Multivariate analysis led us to conclude that RRC Medicare costs were 13 percent higher than those of other rural hospitals in 1984, holding constant Medicare case mix, teaching activity, and relative wages. However, RRCs were 9 percent ($200) less costly per case than urban hospitals. Outliers explained most of the cost difference between RRCs and urban hospitals, while transfers were more important in explaining differences between RRCs and other rural hospitals. Given that bed size alone explained all of the RRC-other rural cost difference, paying RRCs the urban rate results in an indirect way of paying them based on bed size. It also gives them an average excess of payment over Medicare cost well above the national rural and urban average.     

Cost function analysis of Medicare policy: are reimbursement limits for rural home health agencies sufficient?

This paper estimates a hybrid total cost function to determine to what extent an urban/rural differential exists in home health agency expenditures in Wisconsin in 1987-1988. We find that costs are over $16 higher per visit in urban Milwaukee than in rural and small MSA counties, providing no evidence that Medicare reimbursement limits should be raised to reflect 'ruralness'. However, the cost of providing skilled nursing care exceeds both urban and rural reimbursement limits. Because rural agencies depend more on Medicare clients and provide disproportionately more skilled nursing visits, this might represent the source of any financial difficulty.     

Fiscal outcomes of the closing of Central State Hospital: An analysis of the costs to state government

This study reports estimates of the preclosure and postclosure costs of mental health services for patients directly affected by the closing of Central State Hospital. The data come from state budget documents and from the billing records of the community mental health centers serving the discharged clients. On average, it cost Indiana approximately $68,347 (in 1995 dollars) to provide 12 months of state hospital care for this client cohort in fiscal year 1993. In contrast, during the first year following the closure, the average per patient cost to the state was $55,417. When clients were served exclusively in community care settings, the average annual per patient cost was $40,618. The analyses suggest that the closing reduced the costs of caring for this cohort of patients by approximately 18.9%. A significant portion of the cost savings to the state mental health budget was achieved by shifting some of the direct patient care costs to Medicaid/Medicare.The analyses and conclusions reported here are the sole responsibility of the author and do not necessarily reflect the position or opinions of the funding institutions, the individuals named in the acknowledgments section, the agencies that participated in this study, or Indiana University.He is also with the Indiana Consortium for Mental Health Services Research in Bloominton.     

Biased enrollment of Medicare beneficiaries in HMO plans--implications for Medicare costs

Policymakers assumed that the enrollment of Medicare beneficiaries in health maintenance organization (HMO) plans would generate significant cost savings for Medicare. The Health Care Financing Administration (HCFA) calculates the reimbursement to HMOs per Medicare beneficiary on the basis of individual and community-specific characteristics. Estimates of the individual-specific profitability rate for enrolling an individual in a Medicare HMO risk plan suggest that the probability of enrollment in HMOs increases with a higher profitability score. The probability of not enrolling high-loss cases is found to be high, indicating that the biased selection in HMO plans actually increases the overall cost of running the Medicare program.     

Measuring geographic variations in hospitals' capital costs

The Health Care Financing Administration (HCFA) has proposed incorporating hospital capital payments into the Medicare prospective payment system. HCFA's proposal includes an adjustment to capital payments for geographic differences in capital costs, derived from the prospective payment system area hospital wage index. Alternatively, the geographic adjustment could be based on an area construction cost index. Geographic construction cost indexes calculated from the cost per square foot of finished structures or from construction labor and materials input prices are evaluated in this article.     

Impact of Critical Access Hospital Conversion on Beneficiary Liability

ABSTRACT: Context: While the Medicare Critical Access Hospital (CAH) program has improved the financial viability of small rural hospitals and enhanced access to care in rural communities, the program puts beneficiaries at risk for paying a larger share of the cost of services covered under the Medicare part B benefit. Purpose: This paper examines the impact of hospital conversion to CAH status on beneficiary out‐of‐pocket coinsurance payments for hospital outpatient services. Methods: The study is based on a retrospective observational design using administrative data from Medicare hospital cost reports and fee‐for‐service beneficiary claims from 1999 to 2003. The study compares changes in beneficiary co‐payments before versus after CAH conversion with payment trends among small rural non‐converting hospitals over the same period. Findings: Conversion to CAH status is associated with an increase in beneficiary coinsurance payments per outpatient visit of $17.19, equivalent to 34% of the sample average. However, CAH designation had no significant effect on the share of outpatient costs paid by the beneficiary. Most of the increase in beneficiary liability associated with conversion is attributable to the provision of more services per outpatient visit. Conclusions: While this and other studies show that conversion to CAH status results in more intensive outpatient care, CAH conversion does not appear to inadvertently create financial barriers to accessing ambulatory services in remote rural communities by forcing beneficiaries to pay a higher share of their Medicare part B costs.     

Reducing Transfers among Long-Stay Nursing Facility Residents to Acute Care Settings: Effect of the 2013‒2016 Centers for Medicare and Medicaid Services Initiative

ObjectivesFrom 2013 to 2016, the Centers for Medicare and Medicaid Services Initiative to Reduce Avoidable Hospitalizations among Nursing Facility Residents (“the Initiative”) tested a series of clinical interventions and care models, through organizations called Enhanced Care and Coordination Providers (ECCPs), with the goal of reducing avoidable inpatient hospital admissions among long-stay nursing home residents. We identify the effect of the Initiative on the probability and count of acute care transfers [capturing any transfer to the hospital, including hospitalizations (inpatient stays), emergency department visits, and observation stays].DesignWe evaluate the effect of the Initiative on the probability and count of all-cause acute care transfers and potentially avoidable acute care transfers and estimate the average effect of the Initiative per resident per year.Setting and ParticipantsWe use 2011–2016 data from the Centers for Medicare and Medicaid Services Minimum Data Set, version 3.0, nursing home resident assessments linked with Medicare eligibility and enrollment data and Medicare inpatient and outpatient hospital claims. Our sample is limited to Medicare fee-for-service beneficiaries in participating ECCP facilities and a comparison group of long-stay nursing facility residents.MethodsWe evaluate the effect of the Initiative on both the probability and count of all-cause acute care transfers and potentially avoidable acute care transfers using difference-in-differences regression models controlling for both resident-level clinical and demographic characteristics as well as facility-level characteristics.ResultsWe found statistically significant evidence of a reduction in both the probability and count of all-cause and potentially avoidable acute care transfers among long-stay nursing facility residents who participated in the Initiative, relative to comparison group residents.Conclusions and ImplicationsThe clinical interventions and care models implemented by the ECCPs show that by using staff education, facility leadership and physician engagement, and/or clinical assessment and treatment of residents who experienced a change in condition, it is possible to reduce acute care transfers of nursing facility residents. This could lead to better outcomes and reduced cost of care for this vulnerable patient population.     

The successful application of business coaching to decrease preventable medical errors

The number and cost of preventable medical injuries and deaths continue to rise in the U.S. healthcare system despite many attempts to avert such occurrences. The Centers for Medicare & Medicaid Services has prudently decided to deny claims for the healthcare costs incurred in treating certain preventable injuries. With the passage of a the Patient Protection and Affordable Care Act, the list of denied healthcare procedures to correct preventable medical injuries will grow, resulting in a further squeezing of the profit margins of medical institutions and providers. In this article, we show that business coaching of the healthcare team is successful in reversing the alarming growth rate of medical errors, thus ensuring the financial success of healthcare institutions adopting business coaching practices.     

Hospice pharmaceutical cost trends

Hospices are required to provide pharmaceuticals under the Medicare Hospice Benefit. Since there are no data describing these costs for hospice programs, this study analyzes data from a cross-sectional survey of 34 hospices concerning their pharmaceutical cost trends. Most respondents reported higher pharmaceutical-related costs between 1998 and 2002, but a significant minority reported that their costs had decreased. Pharmaceutical costs varied by patient setting, but long-acting opioids and continuous-infusion delivery systems were the two most significant contributors. A variety of mechanisms were employed to control drug costs.     

Cost implications to health care payers of improving glucose management among adults with type 2 diabetes

Objective. To assess the cost implications to payers of improving glucose management among adults with type 2 diabetes. Data Source/Study Setting. Medical-record data from the Community Quality Index (CQI) study (1996-2002), pharmaceutical claims from four Massachusetts health plans (2004-2006), Medicare Fee Schedule (2009), published literature. Study Design. Probability tree depicting glucose management over 1 year. Data Collection/Extraction Methods. We determined how frequently CQI study subjects received recommended care processes and attained Health Care Effectiveness Data and Information Set (HEDIS) treatment goals, estimated utilization of visits and medications associated with recommended care, assigned costs based on utilization, and then modeled how hospitalization rates, costs, and goal attainment would change if all recommended care was provided. Principal Findings. Relative to current care, improved glucose management would cost U.S.$327 (U.S.$192-711 in sensitivity analyses) more per person with diabetes annually, largely due to antihyperglycemic medications. Cost-effectiveness to payers, defined as incremental annual cost per patient newly attaining any one of three HEDIS goals, would be U.S.$1,128; including glycemic crises reduces this to U.S.$555-1,021. Conclusions. The cost of improving glucose management appears modest relative to diabetes-related health care expenditures. The incremental cost per patient newly attaining HEDIS goals enables payers to consider costs as well as outcomes that are linked to future profitability.     

The individual and health sector costs of asthma: the first year of a longitudinal study in New South Wales

OBJECTIVE: To identify the resources used and the costs incurred by people with asthma for health care and non-health care products and services to manage asthma. METHODS: A prospective, longitudinal study, using self-reported and administrative data, commenced in 2001 in New South Wales (NSW). Data sources included two six-monthly surveys, hospital admission data from NSW Health, and pharmaceutical benefits and Medicare data. A cohort of 245 people with asthma, aged between 5-75 years, was recruited from the general population and from hospital emergency departments. The study measured the use and cost of health care services and products, including alternative therapies and home modifications. Costs to both the health care system and individuals were measured. RESULTS: General practitioner visits and asthma medications were the items of health care most commonly used. Medications were also the largest component of individual costs for health care in terms of the average payment and the number of people facing an out-of-pocket cost, although home equipment and modifications were the most expensive individual items. The distribution of individual costs was highly skewed, ranging from dollar 0 to dollar 4,882 per person per annum (median dollar 89). Admitted hospital care was the largest component of the cost to the health care system. CONCLUSION: While individual costs were not large for the majority, some people faced substantial costs, with the highest of these being for non-health care items. Implications: Asthma management policies may need to incorporate schemes to alleviate the impact of costs for the minority experiencing significant out-of-pocket expenses.     

Kaiser-Permanente's Medicare Plus Project: a successful Medicare prospective payment demonstration.

The Medicare Plus project of the Oregon Region Kaiser-Permanente Medical Care Program was designed as a model for prospective payment to increase Health Maintenance Organization (HMO) participation in the Medicare program. The project demonstrated that it is possible to design a prospective payment system that costs the Medicare program less than services purchased in the community from fee-for-service providers; would provide appropriate payment to the HMO; and in addition, creates a "savings" to return to beneficiaries in the form of comprehensive benefits to motivate them to enroll in the HMO. Medicare Plus was highly successful in recruiting 5,500 new and 1,800 conversion members into the demonstration, through use of a media campaign, a recruitment brochure, and a telephone information center. Members recruited were a representative age and geographic cross section of the senior citizen population in the Portland, Oregon metropolitan area. Utilization of inpatient services by Medicare Plus members in the first full year (1981) was 1679 days per thousand members and decreased to 1607 in the second full year (1982). New members made an average of eight visits per year to ambulatory care facilities.     

Trends in Post-Acute Care in US Nursing Homes: 2001-2017

ObjectiveTo describe recent trends in post-acute care provision within nursing homes, focusing specifically on nursing homes’ degree of specialization in post-acute care.DesignRetrospective cohort study.Setting and ParticipantsAll US nursing homes between 2001 and 2017 and all fee-for-service Medicare admissions to nursing homes for post-acute care during that time.MethodsWe measured post-acute care specialization as annual Medicare admissions per bed for each nursing home and examined changes in the distribution of specialization across nursing homes over the study period. We described the characteristics of nursing homes and the patients they serve based on degree of specialization.ResultsThe average number of Medicare admissions per bed increased from 1.2 in 2001 to 1.6 in 2017, a relative increase of 41%. This upward trend in the number of Medicare admissions per bed was largest among new nursing homes (those established after 2001), increasing 68% from 2001 to 2017. In contrast, nursing homes that eventually closed during the study period experienced no meaningful growth in the number of admissions per bed. Over time, the number of Medicare admissions per bed increased among highly specialized nursing homes. The number of Medicare admissions per bed grew by 66% at the 95th percentile and by 25% at the 99th percentile. Nursing homes delivering the most post-acute care were more likely to be for-profit or part of a chain, had higher staffing levels, and were less likely to admit patients who were Black, Hispanic, or dually enrolled in Medicare and Medicaid.Conclusions and ImplicationsOver the last 2 decades, post-acute care has become increasingly concentrated in a subset of nursing homes, which tend to be for-profit, part of a chain, and less likely to serve racial and ethnic minorities and persons on Medicaid. Although these nursing homes may benefit financially from higher Medicare payment, it may come at the expense of equitable access and patient care.