Simulating policy options for psychiatric care in general hospitals under Medicare's PPS.

Psychiatric hospitals and certain distinct part psychiatric units of general hospitals are currently exempt from diagnosis related group (DRG)-based payment under Medicare's prospective payment system (PPS), in large part due to concern about the degree to which such payment would match historical costs for these facilities. This communication simulates DRG-based payments for psychiatric admissions to general hospitals under the PPS and also under a modified version of the PPS. Two major types of modifications are made: (1) an increase in the role of outlier payments and (2) a restructuring of the DRG classification to allow for a difference in the basic payment rate, depending on whether or not care is provided in a facility that is currently exempt. When compared with cost data from just before the start of the PPS, the simulation results show the degree to which these hypothetical modifications will decrease the systematic risk of general hospitals with exempt units from receiving payments that fall short of costs.

Transfers of hospitalized psychiatric patients under Medicare's prospective payment system.

Medicare's reimbursement policy provides payment incentives for hospitals to transfer psychiatric patients to another acute-care facility, especially when the destination facility is exempt from Medicare's prospective payment system. The authors found, however, that transfers were relatively infrequent in 1985, accounting for only approximately 3.4% of all psychiatric hospitalizations under Medicare. The most common type of transfer was from a nonspecialized general hospital bed to a Medicare-exempt psychiatric unit within the same hospital. Given that increasing financial pressures may result in a rise in the number of transfers, the authors discuss potential reforms of Medicare reimbursement for these cases.

An analysis of DRG-based reimbursement for psychiatric admissions to general hospitals.

The authors analyzed the potential financial impact of paying general hospitals on the basis of diagnosis-related groups (DRGs) for Medicare alcohol-drug abuse and psychiatric admissions. Average costs per admission were substantially higher for general hospitals with special psychiatric units that are currently exempt from the prospective payment system (PPS) than for hospitals without exempt units. Simulations of DRG-related payments indicated that these payments would be greater for admissions to hospitals with exempt psychiatric units than for admissions to hospitals without exempt units. However, the differences in costs between these two types of facilities were greater than the differences in payments that would occur under a PPS.

The demand for healthcare among racial/ethnic subpopulations.

OBJECTIVE: To analyze differences in the determination of healthcare expenditures among racial/ethnic groups. DATA SOURCE: The 1987 National Medical Expenditure Survey, a nationally representative sample of the United States population. (Nomenclature reflects racial/ethnic categories as used in the Survey.) STUDY DESIGN: The design was to estimate completely separate demand systems for blacks, Hispanics, and whites, perform statistical tests for the appropriateness of such separation, and carry out various simulations of healthcare expenditures. DATA COLLECTION/EXTRACTION METHODS: All black, white, and Hispanic persons in the 1987 NMES Household Survey were used in this analysis. PRINCIPAL FINDINGS: Several of the differences among the equations for the three racial/ethnic groups appear to be related to access to care, particularly between Hispanics and whites, and to a lesser degree between blacks and whites. Simulations indicated that most of the differences in healthcare spending were due on net to differences in characteristics of the sampled persons and their environments. However, for Hispanics relative to both blacks and whites, some of the differences in total expenditures were also due to differences in the behavior embodied in the equations. CONCLUSIONS: It would be inadequate, and possibly misleading, to allow for differences in health expenditures by simply including dummy variables for blacks, Hispanics, and/or whites in pooled equations estimated for the entire sample. Studies that allow one to analyze the institutional and behavioral aspects of healthcare spending in greater detail are needed for a better understanding of these racial/ethnic differences.

Hospital financial performance under the prospective payment system by type of admission: psychiatric versus medical/surgical.

We performed detailed simulations of DRG-based payments to general hospitals for treatment of nonexempt psychiatric and medical/surgical patients under Medicare's prospective payment system (PPS). We then compared these results to calculated costs for the same patients. Hospitals without specialized psychiatric units tend to fare better financially on their psychiatric than on their medical/surgical caseloads, although the levels of gain for these two types of patients are correlated. Hospitals with nonexempt psychiatric units generally have similar rates of gain on psychiatric and medical/surgical patients. Comparing psychiatric treatment in "scatter-bed" sites with that provided in nonexempt units, the higher rate of gain under PPS for treatment in scatter beds results largely from shorter lengths of stay. We discuss hospital behavior and the relationships between treatment of psychiatric illness under DRG-based payment and its treatment in exempt psychiatric units, which are excluded from DRG-based payment.

Determinants of ambulatory mental health services use for school-age children and adolescents.

OBJECTIVE: To analyze a comprehensive multivariate model of the use of mental health-related ambulatory care services by children ages 6-17. STUDY SETTING: The 1987 National Medical Expenditure Survey, a national probability sample of the U.S. civilian noninstitutionalized population. STUDY DESIGN: A cross-sectional survey of a national probability sample of the U.S. population. Key independent variables include person-level mental health status, health care coverage, family income, and use of mental health services by other family members. DATA COLLECTION: Four in-person interviews were conducted during 1987 using structured questionnaires. A designated family respondent was used to answer questions for other family members, including children. PRINCIPAL FINDINGS: Children with poor mental health in high-income families were more than three times as likely to have a mental health-related visit than children with poor mental health in low-income families. The number of mental health-related visits and the likelihood of seeing a mental health specialist also increased along with family income. Mental health use by other family members was strongly associated with use. CONCLUSIONS: The results from this study provide strong evidence that the socioeconomic status of children is an important factor in explaining unmet need for mental health services.

Reimbursement of sole community hospitals under Medicare's prospective payment system.

Under the prospective payment system (PPS), designated sole community hospitals (SCH's), usually smaller than other rural hospitals but offering comparable services, have had higher average cost levels, in part because of underutilization of plant and equipment. This has resulted in negative operating margins on patient revenues, although local financial support and other revenue sources bring margins on total revenues into the positive range. The PPS legislation has also provided SCH's temporary protection from volume declines. SCH's are more likely than other rural hospitals to experience large volume swings, but only for declines greater than the threshold specified under PPS.

Nursing home residents at risk of hospitalization and the characteristics of their hospital stays.

Little national data have been available to guide the design of programs aimed at reducing the hospitalization of nursing home residents. This article uses the 1987 National Medical Expenditure Survey to identify elderly nursing home residents with an elevated risk of hospitalization and the reasons for and outcomes of residents' hospital stays. Study findings include an elevated risk of hospitalization for residents with one of several different primary diagnoses and a rise in risk as ADL dependence increases. An infection was the main medical reason for roughly 27% of hospital stays. The results suggest possible target groups for two types of programs aimed at reducing hospitalization.

Interactions between hospital and nursing home use.

National estimates are provided, for the first time, of the number of hospitalizations in a year for elderly persons who also experience some nursing home use, and patterns for this interaction are described. In 1987, 816,000 persons were transferred from nursing homes to hospitals, constituting 8.5 percent of all Medicare hospital admissions for persons ages 65 and older. Another 347,000 hospital stays involved people admitted from the community and discharged to a nursing home. The reporting of discharge destination on Medicare hospital bill data in 1987 also is analyzed. It was found that these data may have underreported a nursing home as the destination by between 15 and 20 percent. The magnitude of hospitalizations of nursing home residents suggests that programs aimed at improving nursing home care might have an important impact on total days of hospital care, and that it is important to learn more about the optimal use of expensive hospital care.

Economic impact of transluminal angioplasty.

Using actual bills and follow-up records we attempted to determine the economic impact of percutaneous transluminal angioplasty. The patients selected included forty angioplasties performed early in our experience as well as forty comparable patients who had operations in the same period of time. Clinical follow-up was obtained over four years. The statistics obtained demonstrate the hospital bills for angioplasty were only 24% that of surgical treatment for femoral lesions ($1,329.00 versus $6,112.00) and 16% for iliac lesions ($1,353.00 versus $7,732.00). Using this patient sample and readily available statistical data, we calculated direct national savings for using angioplasty on all patients suitable and used a standard value of life analysis to estimate the value of lives saved by doing the less dangerous procedure. The sum total savings in the United States from using angioplasty in all suitable candidates as opposed to surgery would be $180 million per year for femoral lesions and $117 million for iliac lesions. This could produce a significant savings in medical costs over the coming years.

Reimbursement decisions for hospital services: the case of psychiatric units under Medicare.

If the hospital meets specific requirements, under Medicare's Prospective Payment System (PPS) psychiatric units of general hospitals can apply for and receive an exemption from DRG-based payment. I find empirical evidence that the decision to seek an exemption is affected by a complex set of financial considerations. In addition to the difference in expected payment that would result from exempt versus nonexempt status, other factors at work include a facility's dependence on Medicare for revenues and its attitude toward aggressively gaming Medicare reimbursement options. These results indicate the importance of exemption options in an increasingly competitive market for specialized hospital services.

Provider response to Medicare's PPS: reductions in length of stay for psychiatric patients treated in scatter beds.

We used Medicare discharge data for the years 1984 and 1985 to analyze reductions in lengths of stay for psychiatric patients treated in general hospitals that did not have specialized psychiatric units. In response to Medicare's Prospective Payment System (PPS), not-for-profit hospitals experienced declines in lengths of stay averaging between 10% and 20% two years after they went onto PPS, while for-profit hospitals experienced a somewhat greater decline. Lengths of stay fell most rapidly during the months immediately surrounding the date on which a hospital began to be paid under PPS. This response included an anticipatory effect--hospital lengths of stay began shortening just before PPS payments started.

The rate of adoption of new procedures among physicians. The impact of specialty and practice characteristics.

Four hundred eighty-four physicians were surveyed on the number of new procedures they adopted during a 1-year period. Clear differences were found among specialties. A simultaneous statistical analysis of factors affecting the adoption of new procedures yielded a number of additional significant relationships. Up to an age of approximately 50 years, age has an increasing impact on the number of new procedures adopted by physicians. Beyond that age, it has a decreasing effect. Board certified physicians tend to adopt more new procedures than physicians who are not board certified. Among those physicians in nonurban locations, those in solo practice adopt significantly fewer procedures than those in other practice modes. The implications of these findings for such issues as the rising costs of health care and physician reimbursement systems are discussed.

Determinants of ambulatory treatment mode for mental illness.

We estimate a reduced-form bivariate probit model to analyse jointly the choice of ambulatory treatment from the specialty mental health sector and/or the use of psychotropic drugs for a nationally representative sample of US household residents. We find significant differences in treatment choice by education, gender, race and ethnicity, while controlling for several aspects of self-reported mental health and treatment attitudes. For example, while women are more likely than men to use the specialty mental health sector and more likely to take psychotropic medications, this difference between men and women is much greater for psychotropic medications. The estimated differences may reflect patient preferences in a manner traditionally assumed when interpreting these coefficients in such equations, but we discuss how they may also reflect biases and misperceptions on the parts of patients and providers. We also discuss how our results relate to some findings and policies in the general health care sector.

The use of home care by cancer patients: a multivariate analysis.

The use of home care by cancer patients over the course of a year was analyzed using a two-part model that estimated: (1) the probability of any use, and (2) the quantity of visits given some use. The findings support the use of a two-stage model for estimating home care over single equation approaches. We found that while HMO membership increased the probability of some home care for cancer, it resulted in a smaller number of visits given some use. Health care coverage was also found to have different effects on these two components of total use. Some implications of some of these findings for future policies are discussed.