Cost implications of the delivery of pharmaceutical care services through Australian community pharmacies

Objective — To conduct a cost analysis of the Community Pharmacy Model Practices project in South Australia. Method — As part of a prospective participatory action research programme, the cost analysis identified the main items of fixed and variable costs and of potential cost savings, and expressed them in a framework to aid decision-making. Setting — Ten community pharmacy practices in primary care: five provided generalist medication management, two diabetes care, two asthma care, and one wound management. Services were provided to 411 pharmacy patients (median age 75; 70 per cent female) in the community, resident in a range of nursing home and hostel accommodation, or patients in hospital. There was a maximum of 11 months' observation. Key findings — All the five medication management pharmacies, one of the asthma management pharmacies, and the wound management pharmacy, but neither of the diabetes management pharmacies, were able to generate potential resource savings greater than their total variable costs, so that net resource savings were available to make a contribution to absorbing fixed costs. Conclusions — The provision of medication management services by community pharmacies working to a well-defined, systematic process of patient care within a primary care setting can be expected to reduce overall direct costs to the health system. Similar findings are likely with wound management in pharmacy care, but the results are less certain for asthma management and diabetes management. These results, when considered in the light of possible gains in survival and quality of life, are of significant interest to policymakers concerned with controlling health system costs.     

A Comparative Study of Financial Data Sources for Critical Access Hospitals: Audited Financial Statements,the Medicare Cost Report,and the Internal Revenue Service Form 990

Purpose: Medicare Cost Reports (MCR), Internal Revenue Service Form 990s (IRS 990), and Audited Financial Statements (AFS) vary in their content, detail, purpose, timeliness, and certification. The purpose of this study was to compare selected financial data elements and characterize the extent of differences in financial data and ratios across the MCR, IRS 990, and AFS for a sample of nonprofit Critical Access Hospitals (CAHs). Methods: Line items from AFS of 47 CAHs were compared to data reported in the hospitals’ MCR and IRS 990s. Line items were based on 9 financial indicators commonly used to assess hospital financial performance. Findings: Of the indicators examined, the equity financing ratio most frequently matched between the 3 reports, while salaries and benefits to total expenses and debt service coverage were often different. Variances were driven by differences in individual account balances used to construct the ratios. Relative to AFS, cash was frequently lower on the IRS 990 while marketable securities and unrestricted investments were often higher. Other revenue and net income were consistently lower on the MCR and IRS 990, and depreciation was often higher on the MCR. The majority of total assets and fund balance (equity) values matched across the 3 reports, suggesting differences in classification among detailed accounts were more common than variances between the component totals (total assets, total liabilities, and fund balance). Conclusions: Health policy researchers should consider the impact of these variances on study results and consider ways to improve the availability and quality of financial accounting information.     

An analysis of the cost and revenue of an expanded medical residency

Objective: To analyze the additive costs and revenues resulting from expansion of a medical residency and associated subspecialty programs. Methods: Direct and indirect costs of the residency program were analyzed as was reimbursement for the costs of the residency. To determine whether expansion of the residency affected cost of care, the authors compared the costs of care on the teaching service and nonteaching services. Results: The number of residents increased from 18 medical resident and subspecialty fellows in the 1988 academic year to 36 medical residents and 12 subspecialty fellows in the 1991 academic year. Total measured costs increased by $2,036,570 to $3,911,196. Reimbursement increased to $5,319,117, of which $2,290,221 was attributed to the increase in the number of residents. Net income from the residency after subtracting costs increased by $815,714 to a total of $1,407,971, excluding any higher costs at the authors’ hospital that were an indirect result of the teaching program. Costs for the same diagnosis-related groups (DRGs) were not significantly different on the teaching and nonteaching services. Conclusions: Expanding the medical residency increased the net income available to offset the higher costs per DRG at the hospital. These costs did not increase in proportion to the increase in resident numbers. Increased revenue came primarily from Medicare indirect cost reimbursement. A reduction in this rate from 7.7% to less than 4.1% would have resulted in a net loss for medical education costs. Present reimbursement policy is not aligned with actual costs or public policy goals. This may have undesired effects both now and in the future.     

Measuring conceptual health knowledge in the context of oral health literacy: preliminary results

Objectives: Health literacy encompasses several abilities including word recognition, reading comprehension, communication skills, and conceptual knowledge. To date, conceptual knowledge has not been included in oral health literacy research. This study assesses the validity and reliability of a new instrument and describes conceptual oral health knowledge among a sample of low‐income adults. Methods: One hundred Baltimore adults were administered the Rapid Estimate of Adult Literacy in Medicine (REALM), Short Test of Functional Health Literacy in Adults (Short‐TOFHLA), and a new survey of conceptual oral health knowledge. Respondents were also asked about sociodemographics, dental health, and utilization. Results: Psychometric analysis was used to identify a subset of oral health knowledge questions from the new survey instrument. The resulting Comprehensive Measure of Oral Health Knowledge (CMOHK) was categorized into three levels of knowledge (poor, fair, good). Nearly one‐third of Baltimore adults exhibited the lowest level. CMOHK scores were significantly associated with age, education level, and word recognition (REALM). CMOHK scores were not associated with reading comprehension (Short‐TOFHLA) or dental care visits. Instrument reliability was good (Cronbach alpha = 0.74). Conclusions: This preliminary study yielded a new measure of oral health conceptual knowledge, available for use in future oral health literacy studies. The author presents a conceptual framework of oral health literacy that separates health literacy into four unique components and places decision‐making at the center. Future studies are needed to determine whether this framework is supported by empirical data and leads to improvements in oral health and reductions in health disparities.     

Entrepreneurship and state/mental health center relationships

An effective Community Mental Health Center (CMHC) program in entrepreneurship—the provision of services in the marketplace at a profit to subsidize other programs—requires the support and encouragement of the state-level mental health authority. This paper discusses potential financial, programmatic, political, and managerial risks and rewards to CMHCs and to state authorities from such efforts. As each party faces certain risks as well as rewards from such efforts, it is important that they participate in a process of mutual risk involving: 1) Documenting and legitimizing the entrepreneurship program; 2) Separating funding for seed monies and working capital for ventures, 3) Restructuring the Centers' finances and/or corporate structure to reduce the problems of funds diversion and comingling, 4) Negotiating in advance how the proceeds of the ventures will be used to benefit programs, and 5) Providing technical assistance to enhance the probabilities of success in such ventures. For these steps to work the state authorities must be willing to give up some financial and programmatic control to motivate entrepreneurship on the part of CMHCs.