The effect of costs on Kenyan households' demand for medical care: why time and distance matter.

In an environment of constrained resources, policymakers must identify solutions for financing and delivering health services that are efficient and sustainable. However, such solutions require that policymakers understand the complex interaction between household utilization patterns, factors influencing household medical decisions, and provider performance. This study examined whether and under what conditions out-of-pocket, transportation, and time costs influenced Kenyan households' choice of medical provider for childhood diarrhoeal illnesses. It compared these decisions with the actual cost and quality of those providers to assess strategies for increasing the utilization of high quality, low-cost primary care. This study analyzed nationally-representative survey data through several multinomial nested logit models. On average, time costs accounted for the greatest share of total costs. Households spent the most time and transportation costs utilizing public care, yet were more likely to incur catastrophic time and out-of-pocket costs seeking private care for their child's diarrhoeal illness. Out-of-pocket, transportation, and time costs influenced households' choice of provider, though demand was cost inelastic and households were most responsive to transportation costs. Poorer households were the most responsive to changes in all cost types and most likely to self-treat or utilize informal care. Many households utilized informal care that, relative to formal care, cost the same but was of worse quality-suggesting that such households were making poor medical decisions for their children. To achieve public policy objectives, such as financial risk protection for childhood illnesses and equitable access to primary care, policymakers could focus on three areas: (1) refine financing strategies for further reducing household out-of-pocket costs; (2) reduce or subsidize time and transportation costs for households seeking public and private care; and (3) increase transparency of costs and quality to improve household decisions.

Medicare non-payment of hospital-acquired infections: infection rates three years post implementation.

BACKGROUND: Medicare ceased payment for some hospital-acquired infections beginning October 1, 2008, following provisions in the Medicare Modernization Act of 2003 and the Deficit Reduction Act of 2005. OBJECTIVE: We examined the association of this policy with declines in rates of vascular catheter-associated infections (VCAI) and catheter-associated urinary tract infection (CAUTI). DATA: Discharge data from the Florida Agency for Healthcare Administration from 2007 to 2011. STUDY DESIGN: We compared rates of hospital-acquired vascular catheter-associated infections (HA-VCAI) and catheter-associated urinary tract infections (HA-CAUTI) before and after implementation of the new policy (January 2007 to September 2008 vs. October 2008 to September 2011). This pre-post, retrospective, interrupted time series study was further analyzed with a generalized hierarchical logistic regression, by estimating the probability of a patient acquiring these infections in the hospital, post-policy compared to pre-policy. PRINCIPAL FINDINGS: Pre-policy, 0.12% of admitted patients were diagnosed with CAUTI; of these, 32% were HA-CAUTI. Similarly, 0.24% of admissions were diagnosed as VCAI; of these, 60% were HA-VCAI. Post-policy, 0.16% of admissions were CAUTIs; of these, 31% were HA-CAUTI. Similarly, 0.3% of admissions were VCAIs and, of these, 45% were HA-VCAI. There was a statistically significant decrease in HA-VCAIs (OR: 0.571 (p < 0.0001)) post-policy, but the reduction in HA-CAUTI (OR: 0.968 (p < 0.4484)) was not statistically significant. CONCLUSIONS: The results suggest Medicare non payment policy is associated with both a decline in the rate of hospital-acquired VCAI (HA-VCAI) per quarter, and the probability of acquiring HA-VCAI post- policy. The strength of the association could be overestimated, because of concurrent ongoing infection control interventions.

Determinants of diagnostic imaging utilization in primary care.

OBJECTIVES: To examine patient and physician factors affecting utilization of diagnostic imaging in primary care. DATA SOURCES/STUDY SETTING: Patient-level data from a large academic group practice over the period July 1, 2007, through June 30, 2009. STUDY DESIGN: This is a retrospective cohort study of 85,277 patients cared for by 148 primary care physicians (PCPs). The dependent variable is the number of outpatient imaging exams ordered by each patient's PCP over the study period. Independent variables include 17 patient factors describing both clinical need and demographic characteristics and 7 physician factors. DATA COLLECTION: Data were collected from the electronic medical record and associated administrative databases. PRINCIPAL FINDINGS: Patient factors having a statistically significant effect on both the probability race, more than 10 medications, congestive heart failure, diabetes, hypertension, other problems, visits to the PCP, visits to specialists, and imaging exams ordered by specialists. For physician factors, experience, gender, and having another degree were statistically significant in both portions of the model. CONCLUSIONS: Both patient and physician factors have a substantial effect on primary care outpatient diagnostic imaging utilization. Several of these significantly influence both the probability that any images will be ordered and the intensity (number) of imaging.

Nonpatient revenues in hospitals.

BACKGROUND: Health management studies of hospital revenues have tended to focus on patient-service revenues, with little attention to the magnitude and the nature of nonpatient revenues. OBJECTIVES: This study (a) examines the size and sources of nonpatient revenues in hospitals, (b) analyzes the impact of nonpatient revenues on hospital profit margins, and (c) investigates variations in nonpatient revenues by ownership and bed size. DATA AND METHODS: The data source for this study is the Florida Hospital Uniform Reporting System. The unit of observation is a private, acute care hospital, with the data being averaged over the period 2003-2005 (n = 143). Descriptive statistics and nonparametric tests of differences between groups are the primary methods of analysis. FINDINGS: During the period 2003-2005, on average, other operating revenues accounted for 1.3% and nonoperating revenues accounted for 4.1% of total revenues, although there was considerable variation across hospitals. Nonpatient activities contributed importantly to hospital profit margins. The average patient care margin was 3.1%, and the average total margin before tax was 4.8%. Thus, without nonpatient activities, total margin before tax would have been 1.7 percentage points lower. Nonpatient revenues tended to be more important for not-for-profit compared with for-profit hospitals, with little differences by bed size. PRACTICE IMPLICATIONS: The key practice implication is that because nonpatient activities contribute importantly to hospital profit margins, they should constitute a core element in the organization's financial and operational planning. In particular, hospitals should consider treating nonpatient activities as profit centers.

Variations in hospital administrative costs.

Administrative costs in hospitals are substantial and can have a major effect on performance. Despite this fact, not much research has been done to better understand such costs. This study examined variations in hospital administrative costs using a data set of acute care hospitals in Florida over the period 2000 through 2004. Results indicated that inflation-adjusted total administrative costs increased from about $22 million to $28 million on average over this time period. However, the percentage of total operating costs devoted to administrative costs was quite stable over the period, averaging approximately 23 percent in each of the five years. Compared with those in rural areas, urban hospitals on average had higher administrative costs per adjusted admission but lower administrative costs as a percentage of total operating costs. Hospital administrative costs also differed by ownership: For-profit hospitals on average had higher administrative costs per adjusted admission than not-for-profit and government hospitals, but administrative costs as a percentage of total operating costs were highest for for-profit hospitals and lowest for not-for-profit hospitals, with government hospitals falling in the middle. For bed size, administrative costs as a percentage of total operating costs were highest for the smallest hospitals. Results of this study will be useful to healthcare managers searching for ways to reduce unnecessary administrative costs while continuing to maintain the level of administrative activities required for the provision of safe, effective, high-quality care.

Evidence-based imaging guidelines and Medicare payment policy.

OBJECTIVE: This study examines the relationship between evidence-based appropriateness criteria for neurologic imaging procedures and Medicare payment determinations. The primary research question is whether Medicare is more likely to pay for imaging procedures as the level of appropriateness increases. DATA SOURCES: The American College of Radiology Appropriateness Criteria (ACRAC) for neurological imaging, ICD-9-CM codes, CPT codes, and payment determinations by the Medicare Part B carrier for Florida and Connecticut. STUDY DESIGN: Cross-sectional study of appropriateness criteria and Medicare Part B payment policy for neurological imaging. In addition to descriptive and bivariate statistics, multivariate logistic regression on payment determination (yes or no) was performed. DATA COLLECTION METHODS: The American College of Radiology Appropriateness Criteria (ACRAC) documents specific to neurological imaging, ICD-9-CM codes, and CPT codes were used to create 2,510 medical condition/imaging procedure combinations, with associated appropriateness scores (coded as low/middle/high). PRINCIPAL FINDINGS: As the level of appropriateness increased, more medical condition/imaging procedure combinations were payable (low = 61 percent, middle = 70 percent, and high = 74 percent). Logistic regression indicated that the odds of a medical condition/imaging procedure combination with a middle level of appropriateness being payable was 48 percent higher than for an otherwise similar combination with a low appropriateness score (95 percent CI on odds ratio=1.19-1.84). The odds ratio for being payable between high and low levels of appropriateness was 2.25 (95 percent CI: 1.66-3.04). CONCLUSIONS: Medicare could improve its payment determinations by taking advantage of existing clinical guidelines, appropriateness criteria, and other authoritative resources for evidence-based practice. Such an approach would give providers a financial incentive that is aligned with best-practice medicine. In particular, Medicare should review and update its payment policies to reflect current information on the appropriateness of alternative imaging procedures for the same medical condition.

Factors affecting productive efficiency in primary care clinics.

This study examines factors affecting the productive efficiency of primary care clinics. The empirical analysis uses a single-stage stochastic frontier regression model, in which factors affecting productive efficiency are specified as part of the inefficiency error component and estimated simultaneously with the production function. The study population includes primary care clinics in the US Military Health System from 1999 through 2003; the analytical data set is an unbalanced panel of 442 observations. The study's main results were that primary care clinics not associated with medical centres had significantly higher levels of productive efficiency than those associated with medical centres and that having proportionately more civilian staff (and thus less turnover) had a positive impact on productive efficiency. Due to their nature, these findings would be expected to also be applicable to the production of primary care in other settings. A key implication of the results is that improvements in productive efficiency should be a top priority, given the possibility for providing more primary care visits without increases in cost.

Managed care payment and administrative costs in Florida hospitals.

This study addresses the question of whether managed care increases administrative burden by examining the association between the extent of managed care payment and administrative costs in hospitals. The data set includes acute-care urban hospitals in Florida with at least 100 beds over the period 2000-2004. The results indicated that on average hospitals with a low level of managed care payment had significantly higher administrative costs per adjusted admission and as a percentage of total operating costs, although the results differed somewhat when broken out by type of managed care. The results do not support the argument that managed care results in increased administrative burden for hospitals. Although there were some differences depending on the type of managed care, in no case was more managed care payment associated with higher administrative costs.

Cost inefficiency and hospital health outcomes.

This study explores the association between cost inefficiency and health outcomes in a national sample of acute-care hospitals in the US over the period 1999-2001, with health outcomes being measured by both mortality and complications rates. The empirical analysis examines health outcomes as a function of cost inefficiency and other determinants of outcomes, using stochastic frontier analysis to obtain hospital cost inefficiency scores. The results showed no systematic pattern of association between cost inefficiency and hospital health outcomes; the basic results were unchanged regardless of whether cost inefficiency was measured with or without using instrumental variables. The analysis also indicated, however, that the association between cost inefficiency and health outcomes may vary substantially across geographical regions. The study highlights the importance of distinguishing between 'good' costs that reflect the efficient use of resources and 'bad' costs that stem from waste and other forms of inefficiency. In particular, the study's results suggest that hospital programs focused on reducing cost inefficiency are unlikely to be associated with worsened hospital-level mortality or complications rates, while, on the other hand, across-the-board reductions in cost could well have adverse consequences on health outcomes by reducing efficient as well as inefficient costs.

The effect of managed care on hospitals' provision of uncompensated care.

This study examines the effect of managed care on hospitals' provision of uncompensated care, using a new measure of managed care that is hospital-specific, rather than measured for the area as a whole, and which includes payment by preferred provider organizations (PPOs) as well as by health maintenance organizations (HMOs). Based on data for Florida hospitals in the period 1998-2002, the results indicate that a higher percentage of private managed care patient-days was associated with a decrease in uncompensated care as a percentage of total operating expenses, holding net profit margin and other factors constant. The results suggest that spillover effects on uncompensated care should be taken into account when considering increases in managed care payment.

Analyzing administrative costs in hospitals.

Using an integrated, management-based approach, this article presents a conceptual framework for analyzing administrative costs in hospitals; the framework differentiates among three types of administrative costs-operational, payer-based, and regulatory--on the basis of the locus of control. An illustration of the framework uses 2003 data for Florida hospitals.

Cost inefficiency and mortality rates in Florida hospitals.

This study examines the relationship between health outcomes and cost inefficiency in Florida hospitals over the period 1999-2001, with health outcomes measured by risk-adjusted in-hospital mortality rates. Previous research has come to conflicting conclusions regarding the relationship between costs and health outcomes. We hypothesize that these seemingly conflicting findings are due to the fact that total cost has two components--cost that reflects the best use of resources under current circumstances and cost associated with waste or inefficiency. By isolating costs due to inefficiency, we can examine directly their relationship, if any, to hospital mortality rates, and begin to assess whether policies that create incentives for hospitals to increase efficiency have adverse effects on health outcomes. We regress an in-hospital mortality index for each hospital on a measure of the hospital's cost inefficiency, obtained from a stochastic cost frontier estimation, as well as on predicted mortality and a set of variables linked to mortality performance. Our results indicate a positive and significant relationship between a hospital's mortality performance and its inefficiency: on average, a one percentage point reduction in cost inefficiency would be associated with one fewer in-hospital death per 10,000 discharges, holding patient risk and other factors constant.

A generic model for evaluating payor net cost savings from a disease management program.

Private and public payors increasingly are turning to disease management programs as a means of improving the quality of care provided and controlling expenditures for individuals with specific medical conditions. This article presents a generic model that can be adapted to evaluate payor net cost savings from a variety of types of disease management programs, with net cost savings taking into account both changes in expenditures resulting from the program and the costs of setting up and operating the program. The model specifies the required data, describes the data collection process, and shows how to calculate the net cost savings in a spreadsheet format. An accompanying hypothetical example illustrates how to use the model.

Comparing high- and low-performing hospitals using risk-adjusted excess mortality and cost inefficiency.

This study examines characteristics associated with high- and low-performing hospitals, where performance is defined in terms of both mortality outcomes and efficiency. In particular, we use data for Florida hospitals in 1999-2001 to classify hospitals into performance groups based on both risk-adjusted excess mortality and cost efficiency. The results indicate that hospitals in the high-performing group were more likely to be for-profit, had higher occupancy rates, had proportionately more Medicare and proportionately fewer Medicaid and self-pay patients, used fewer patient-care personnel per admission, and had higher operating margins than all other hospitals. Hospitals in the low-performing group, on the other hand, were less likely to be for-profit, had more beds, used more patient-care personnel per admission, had lower pay per patient-care personnel, had higher average costs, and had lower operating margins than all other hospitals. Interestingly, managed care presence, measured by proportion of HMO-PPO admissions, was not a significant factor in differentiating hospital performance groups.

Costs, charges, and revenues for hospital diagnostic imaging procedures: differences by modality and hospital characteristics.

PURPOSE: This study examined financial data reported by Florida hospitals concerning costs, charges, and revenues related to imaging services. METHODS: Financial reports to the Florida Hospital Uniform Reporting System by all licensed acute care facilities for fiscal year 2002 were used to calculate four financial indices on a per procedure basis. These included charge, net revenue, operating expense (variable cost), and contribution margin. Analysis, stratified by cost center (imaging modality), tested the effects of bed size, ownership, teaching status, and urban or rural status on the four indices. RESULTS: The mean operating expense and charge per procedure were as follows: computed tomography (CT): $51 and $1565; x-ray and ultrasound: $55 and $410; nuclear medicine (NM): $135 and $1138; and magnetic resonance imaging (MRI): $165 and $2048. With all four modalities, for-profit hospitals had higher charges than not-for-profit and public facilities. Excepting NM, however, the difference by ownership disappeared when considering net revenue. Operating expense did not differ by ownership type or bed size. CONCLUSIONS: Operating expense (variable cost) per procedure is considerably lower for CT than for MRI. Consequently, when diagnostically equivalent, CT is preferable to MRI in terms of costs for hospitals. If the cost structure of nonhospital imaging is at all similar to hospitals, the profit potential for performing CT and MRI seems to be substantial, which has relevance to the issue of imaging self-referral.

Ownership and changes in hospital inefficiency, 1986-1991.

This study examines how ownership affected changes in hospital inefficiency after the introduction of prospective payment by Medicare. Using a national data set, we estimate cost frontiers for 1986 and 1991 to assess hospitals' efficiency relative to best practice in both those years. We then use regression analysis to determine the effect of ownership on the change in hospitals' efficiency. The results indicate that, in both 1986 and 1991, mean inefficiency was highest for for-profit hospitals and lowest for not-for-profit hospitals, with government hospitals falling in the middle. Moreover, between 1986 and 1991, both for-profit and government hospitals had significantly less improvement in efficiency than not-for-profit hospitals, all else equal.