Hospital payment effects on acute inpatient care for mental disorders.

We examined the extent to which inpatient care for patients with mental disorders in general, acute care hospitals responds differently to two types of prospective hospital payment. In Maryland, hospitals have been regulated since 1976 under two forms of payment based on per-service and per-case definitions of hospital output. The study utilizes a 20% sample of 58,000 mental-disorder discharges from 21 per-case- and 24 per-service-reimbursed hospitals in Maryland between fiscal years 1977 and 1980. The effects of payment method on length of stay are examined through the application of multivariate regression models. The empirical results are generally consistent with the notion that the per-case payment method provides some incentives for hospitals to reduce the length of stay. The regulatory effects, however, vary with patient characteristics, particularly by diagnosis.

Economic rents derived from hospital privileges in the market for podiatric services.

This study examines the relative impacts of human capital and market conditions on the economic rents associated with hospital privileges in the market for footcare. An empirical model of hospital privileges for podiatrists is formulated based on the Pauly-Redisch model of hospital behavior. The privilege model is then incorporated into a model of podiatrists' earnings via a selection adjustment as proposed by Heckman and Lee. The results indicate the persistance of economic rents even after controlling for unobserved 'quality' factors.

Cost implications of hospital unionization: a behavioral analysis.

The growth of unionization among hospital workers was sharply accelerated by the 1974 amendments to the National Labor Relations Act covering voluntary hospital workers. With continuing inflationary pressures in the hospital sector, the cost implications of the recent and projected growth of hospital unions is of some concern to policymakers. This article presents estimates of union cost impacts based on data from hospitals in Maryland, Massachusetts, New York, and Pennsylvania. Cross-sectional regressions with data for 1975 yield positive union impacts of 3.3 percent on total costs, 4.1-5.9 percent on cost per case, and 6.1 percent on cost per day. Reestimation of the model with data on changes over the 1971-1975 period yields similar results. We also find that the cost impact of unionization varies with the pattern of coverage (being lower for service employees and RNs) and with the extent of cost-based reimbursement. This suggests that future cost impacts of union growth may be moderated as prospective payment systems for hospitals become more widespread.

Episodes of illness and access to care in the inner city: a comparison of HMO and non-HMO populations.

Using data from a 1974 household survey, accessibility to ambulatory care is compared for residents of an inner-city area (East Baltimore) whose usual source of care is an HMO (the East Baltimore Medical Plan) and residents of the same area with other usual sources of care. Accessibility is measured by the probability of receiving care for an episode of illness. Results from multivariate linear and probit regressions indicate that children using the HMO are more likely to receive care than are children with other usual care sources, but no significant differences in the probability of receiving care are found among adults. Evidence of a substitution of telephone care for in-person care is also found among persons using the HMO. Data from a 1971 household survey of the same area suggest that selectivity is not an important confounding factor in the analysis.

Utilization and case-mix impacts of per case payment in Maryland.

Maryland has simultaneously operated per case and per service hospital payment systems since 1976 with varying levels of stringency in setting per case rates. Regression analyses of this experience are used to compare the impacts of these systems on admissions, length of stay, and case-mix costliness from July 1, 1976 to June 30, 1981. Our results indicate a positive effect on admissions and negative effects on case mix and length of stay for the per case payment approach relative to the per service approach. More stringent levels of per case payment are associated with stronger utilization responses.

Schooling, employment, and idleness in young adults with serious physical health conditions: effects of age, disability status, and parental education.

PURPOSE: Education, employment, and "idleness" in young adults with ongoing physical health conditions were examined in relation to parents' education and respondent's age and co-existing disabilities. METHODS: Telephone interviews were conducted with 421 individuals aged 20-24 years randomly drawn from public health programs in two midwestern states. In addition to a chronic health condition, 18% of the sample also had mental retardation, 21% also had a physical disability (but no retardation), and 11% also had a learning disability (but no mental retardation or physical disability). Youth were considered "idle" if they were not in school, not employed, not married, and had no children. RESULTS: Thirty-seven percent of the sample were enrolled in an educational program, and 48% were employed either part-time or full-time. Seventeen percent were both in school and employed, 50% were in school or employed, and 33% were neither in school nor working. Overall, 23% of the sample were idle. Youth with mental retardation were two to three times more likely to be in school compared to youth with a chronic physical condition alone. Youth with mental retardation and physical disabilities were less likely to be employed and more likely to be idle compared to youth with only a chronic condition. Parental education affected rates of schooling and employment. Compared to a general population sample of youth in the same states, youth with ongoing health problems were at higher risk for idleness. CONCLUSIONS: Youth with chronic health conditions and either mental retardation or physical disabilities are at higher risk for idleness compared to youth with a chronic condition alone or to youth in general.

Mental health benefit limits and cost sharing under managed care: a national survey of employers.

Mental health services experts suggest that managed care diminishes the need for arbitrary benefit limits and consumer cost-sharing. Data from 577 health plans were used to test the hypotheses that health maintenance organizations (HMOs) and carve-out plans are less likely to use benefit limits or service exclusions, have more generous limits, and have lower cost-sharing requirements than non-HMOs and non-carve-out plans. The results show that HMOs were more likely to use service exclusions and did not make less use of benefit limits. Carve-outs were less likely to use some coverage exclusions. Comparisons of the stringency of limits and cost-sharing provisions did not show consistent differences.

Hospital ownership and the care of uninsured and Medicaid patients: findings from the National Hospital Discharge Survey 1979-1984.

From 1980 to 1984 Americans with no health insurance increased from 13.9% to 17.1% of the non-elderly population. Non-elderly persons covered by Medicaid declined from 6.2% to 5.6%. Previous studies of the share of the burden of uncompensated care borne by various provider groups present opposing findings. The National Hospital Discharge survey data presented here demonstrate that for-profit hospitals serve significantly lower percentages of uninsured discharges than secular or church-affiliated non-profit hospitals and public hospitals. The same pattern of differentials is observed with respect to Medicaid. On the whole the results of the survey tend to support the argument that private non-profit hospitals do indeed render greater public services in treating indigent patients than do for-profit hospitals. It must also be emphasized, however, that the results show all private hospitals falling somewhat short of the standard set by public hospitals in treating indigents. Thus, the continued shrinkage of the public hospital sector has serious policy implications.

The decline in the Blue Cross Plan admission rate: four explanations.

Between 1968 and 1979, there occurred a steady decrease in the hospital admission rate for Blue Cross Plan members, in contrast to the steady increase in the admission rate for the under-65 U.S. population as a whole. Four general factors were studied to explore the reasons for this relative decrease: utilization control and cost containment activities instituted by Blue Cross Plans, the decline in Plan nongroup membership, duplicate coverage within families, and deficiencies in the family factor technique to estimate overall Plan membership. With some interesting exceptions within one of the factors, all four offer plausible explanations for the decline in the admission rate among Blue Cross Plan members.

Hospital cost and efficiency under per service and per case payment in Maryland: a tale of the carrot and the stick.

The simultaneous operation of per case and per service payment systems in Maryland, and the varying levels of stringency used in setting per case rates, allows a comparison of the effects of differing incentive structures on hospital costs. This paper presents such a comparison with 1977-1981 data. Regressions performed on cost-per-case and total cost data indicate that costs were lower only when per case payment limits were very stringent. Positive net revenue incentives appeared to be insufficient to induce a reduction in length of stay or ancillary services use. These changes in medical practice patterns thus appear more likely under the threat of financial losses--that is, under the threat of the stick rather than the inducement of the carrot.

Economic class and differential access to care: comparisons among health care systems.

This paper presents a new technique for describing inequality of access to medical care. Access is described by the empirical relationship between need and the probability of entering the health care system for treatment. The need-entry probability relationship for one population group is compared with that for another population group to determine the extent of access differentials (differences in entry probabilities) at varying levels of need. As an illustrative application, the technique is employed to describe access differentials by economic class in six different geographic areas located in five different countries (Canada, England, Finland, Poland, United States) with differently structured health care systems. Although the findings for adults varied considerably from area to area, the access differentials among children were surprisingly consistent and unrelated to health care system structure. In particular, it appears that higher family income is associated with greater access to medical care among children at all levels of need. The paper concludes with suggestions for further applications of the proposed technique to problems of monitoring and evaluating the effectiveness of policies aimed at reducing the extent of access inequality.

The supply of charity services by nonprofit hospitals: motives and market structure.

This article studies provision of charity care by private, nonprofit hospitals. We demonstrate that in the absence of large positive income effects on charity care supply, convex preferences for the nonprofit hospital imply crowding out by other private or government hospitals. Extending our model to include impure altruism (rivalry) provides a possible explanation for the previously reported empirical result that both crowding out and income effects on indigent care supply are often weak or insignificant. Empirical analysis of data for hospitals in Maryland provides evidence of rivalry on the supply of charity care.

Updated estimates of earnings benefits from reduced exposure of children to environmental lead.

The recent and important study by Schwartz found that almost three-fourths of the benefits of reduced lead exposure in children are in the form of earnings gains (earnings losses avoided). New data on recent trends in returns to education and cognitive skills in the labor market suggest a need to revise this estimate upward. Based on an analysis of data from the National Longitudinal Survey of Youth, the present study estimates that an upward revision of at least 50% (or $2.5 billion per annual birth cohort) is indicated. The study also finds evidence that percentage earnings gains are considerably larger for females than for males.

The impact of certificate-of need controls on hospital investment.

Certificate-of-Need (CON) controls over hospital investment have been enacted by a number of states in recent years and the National Health Planning and Resources Development Act of 1974 provides strong incentives for adoption of CON in additional states. In this study, we review the questions that have been raised about the effectiveness of CON controls and then we develop quantitative estimates of the impact of CON on investment. These estimates show that CON did not reduce the total dollar volume of investment but altered its composition, retarding expansion in bed supplies but increasing investment in new services and equipment. We suggest that this finding may be due to (1) the emphasis in CON laws and programs on controlling bed supplies and (2) a substitution of new services and equipment for additional beds in response to financial factors and organizational pressures for expansion. Finally, we caution against the conslusion that CON controls should be broadened and tightened, though our results might be so interpreted, because of the practical difficulties involved in reviewing and certifying large numbers of small investment projects.

The effect of hospital payment methods on the pattern and cost of mental health care.

The authors report on a study of the impact of a prospective payment method on hospital charges and mix of services provided to a group of Medicare patients treated for mental disorders in general acute care hospitals in Maryland. The study focused on per case reimbursement, under which hospitals are guaranteed a level of total revenue based on the number and case mix of discharges, and examined its effect on hospital charges during an index admission and on hospital and non-hospital charges over a three-month period following the index admission. The results suggest that per case reimbursement provides incentives to reduce the cost of one hospital stay, but this cost reduction is possibly offset by a higher readmission rate or by higher readmission charges. The authors conclude that the impact of the per case payment method on the total cost of mental health care over a specific period of time is insignificant, but that the payment method may influence the pattern of care.

Disability management, employee health and fringe benefits, and long-term-disability claims for mental disorders: an empirical exploration.

Mental disorders account for a large share of claims and benefit costs in both private and public long-term-disability (LTD) insurance programs. This is the first empirical study to explore factors that may explain variations in private-sector LTD claims incidence and cost across groups of employees. Employee fringe-benefit arrangements, including patterns of coverage for mental health treatment, are found to be important predictors of incidence rates. Award rates for public disability insurance coverage (SSDI) are also strongly related to claims incidence, suggesting that private LTD is an important pathway to SSDI benefits. Some employee disability-management strategies, such as front-line manager involvement and provision of alternative jobs for employees returning from disability leave, are predictive of lower claims rates and/or costs.

Benefit flexibility, cost shifting and mandated mental health coverage.

This paper presents a policy analysis of options for making a state's mandated mental health benefit more flexible while maintaining insurance premiums at a constant level. The analysis illustrates the difficult choices facing legislatures that attempt to balance improved coverage for mental health care with concerns about rising health care costs. A sophisticated simulation model is used to assess the costs of four alternative insurance benefit design options.