A comparison of alternative medicare reimbursement policies under optimal hospital pricing.

This paper applies and extends the use of a nonlinear hospital pricing model, recently posited in the literature by Dittman and Morey [1]. That model applied a hospital profit-maximizing behavior and studied the effects of optimal pricing of hospital ancillary services on the incidence of payment by private insurance companies and the Medicare trust fund. Here, we examine variations of the above model where both hospital profit-maximizing and profit-satisficing postures are of interest. We apply the model to three types of Medicare reimbursement policies currently in use or under legislative mandate to implement. The policies differ according to hospital size and whether cross-subsidies are allowed. We are interested in determining the effects of profit-maximizing and -satisficing behaviors of these three reimbursement policies on the levels of profits received, and on the respective implications for private payors and the Medicare trust fund.

Optimal investigation policies under selected PSRO procedures.

This article presents a methodology for utilization review which aids the local Professional Standards Review Organization (PSRO) in selecting optimal timing of Concurrent Stay certification by diagnosis. This procedure is accomplished by modeling patients' admissions, inpatients stays and discharges for each diagnosis as a stochastic process which is audited under the PSRO by three utilization review techniques: preadmission, concurrent and retrospective review. The timing of concurrent stay certification is determined so that the maximum benefits are derived for the utilization review cost expanded. The methodology presented here is a tool to aid local PSRO management in determining the most cost-beneficial utilization review process to utilized in their jurisdiction. It is not an attempt to demonstrate the effectiveness of our utilization review policy over another in general. On the contrary, while the model is generalizable to every PSRO, the utilization review policies resulting from any application are situation-specific. The major contributions of this article are new insight into modeling the utilization review process and the provision of a methodology for which computer programs exist and are readily available to any PSRO that should desire to determine its utilization review procedure in this cost-benefit framework. In order to apply the model it is necessary that certain parameters specific to the application site be estimated or assumed. Exact procedures to aid the PSRO in parameter estimation is the subject of current investigation.

Consideration of benefits and costs: a conceptual framework for the health planner.

It is not possible to set forth "cookbook" formulae to which health planners can refer when considering various priorities and recommended actions in the development of an HSP and AIP. It is, however, possible to develop a general framework for health planners to use in considering priorities of goals and in selecting recommended actions.

Hospital profit planning under Medicare reimbursement.

The federal Medicare regulations reimburse hospitals on a pro rata share of the hospital's cost. Hence, to meet its financial requirements, a hospital is forced to shift more of the financial burdens onto its private patients. This procedure has contributed to double digit inflation in hospital prices and to proposed federal regulation to control the rate of increase in hospital revenues. In this regulatory environment, we develop nonlinear programming pricing and cost allocation models to aid hospital administrators in meeting their profit maximizing and profit satisfying goals. The model enables administrators to explore tactical issues such as: (i) studying the relationship between a voluntary or legislated cap on a hospital's total revenues and the hospital's profitability, (ii) identifying those departments within the hospital that are the most attractive candidates for cost reduction or cost containment efforts, and (iii) isolating those services that should be singled out by the hospital manager for renegotiation of the prospective or "customary and reasonable" cap. Finally the modeling approach is helpful in explaining the departmental cross subsidies observed in practice, and can be of aid to federal administrators in assessing the impacts of proposed changes in the Medicare reimbursement formula.

Measuring efficiency in acute care hospitals: an application of data envelopment analysis.

In this article, the authors attempted to demonstrate how DEA can be useful to hospital administrators and health care planners. They used actual data collected by the American Hospital Association through its Monitrend Data Service. Since these were national data, they are presented here for illustrative purposes only. The efficiency with which a hospital operates may well depend upon the local or regional labor market, the competition among health care providers in that market, and the demographics of the service area. The choice of variables was dictated by reasonableness and availability of data. Given the routine collection of case mix data by DRG since 1984, the use of a different set of output variables for any future studies would be quite appropriate. Additionally, if DEA were to be used, a consensus concerning relevant controllable and non-controllable input variables would need to be achieved. There are more technical caveats of which the reader should be aware. 1) The efficiency scores are all relative and are based on the performance of the other hospitals being compared; nothing can be said about the absolute efficiency of a given hospital. However, the relative ratings are conservative in that the approach "bends over backwards" to give the individual hospital the benefit of the doubt in terms of the relative importance of the various outputs and inputs utilized. The approach maintains equity in that any weights chosen for a given hospital must be feasible for all of the other hospitals. 2. The ratings assume a causal impact of the inputs on the outputs. In addition, it is possible that inclusion of additional inputs and outputs could modify the relative scores and/or help explain the differences. However, based on the factors available, any unit rated inefficient is inferior in a very real and demonstrable sense. 3. DEA is based on the generalized notion of convexity which assumes that the performance arrived at by taking any linear weighted combination of other hospitals' inputs and outputs represents a feasible and achievable technology. The general frontier surface is approximated by piecewise-linear segments with the result that observed differences in efficiency cannot be explained away as differences in economies of scale. 4. The inefficiency score and the resource conservation potentials are based on a unit's so-called contraction path, i.e., all of the controllable inputs are required to be reduced by the same factor.(ABSTRACT TRUNCATED AT 400 WORDS)