Hospital cost shifting revisited: new evidence from the balanced budget act of 1997.

This paper analyzes hospital cost shifting using a natural experiment generated by the Balanced Budget Act (BBA) of 1997. I find evidence that urban hospitals were able to shift part of the burden of Medicare payment reduction onto private payers. However, the overall estimated degree of cost shifting is small and varies according to a hospital's share of private patients. At hospitals where Medicare is a small payer relative to private insurers, up to 37% of BBA cuts was transferred to private payers through higher payments. In contrast, hospitals with greater reliance on Medicare were more financially distressed, as these hospitals saw large BBA cuts but were limited in their abilities to cost shift.

Financial protection of households against health shocks in Greece during the economic crisis.

BACKGROUND: Harsh funding cutbacks along with measures shifting cost to patients have been implemented in the Greek health system in recent years. Our objective was to investigate the evolution of financial protection of Greek households against out-of-pocket payments (OOPP) during the economic crisis. METHODS: National representative data of 33,091 households were derived from the Household Budget Surveys for the period 2008-2015. Financial protection was assessed by applying the approaches of catastrophic (CHE) and impoverishing OOPP. The determinants of CHE and impoverishment were examined using binary logistic regressions. RESULTS: OOPP dropped by 23.5% in real values between 2008 and 2015, though their share in households' budget rose from 6.9% to 7.8%, with an increasing trend since 2012. These outcomes were driven by significant increases in medical products (20.2%) and inpatient (63%) OOPP, while outpatient expenses decreased considerably (-62%). Both incidence and overshoot of CHE were significantly exacerbated. The additional burden was distributed progressively, hence, financial risk inequalities decreased. Food poverty increased, but its incidence still remains at very low levels. Both incidence and intensity of relative poverty increased considerably in real terms. The poverty impact of OOPP is aggravating following 2012, and 1.9% of individuals were impoverished due to OOPP in 2015. Households of higher size, lower expenditure quintile, in urban areas, without disabled, elderly or young children members, and with younger or retired, better-educated breadwinners were significantly less vulnerable to CHE. Households in the lower-middle expenditure quintile, in rural regions, and with elderly members were facing higher risk, while wealthier families exhibited a considerable lower likelihood of impoverishment. CONCLUSIONS: The expansion of reliance of healthcare funding on OOPP has increased the financial risk and hardship of Greek households, which may disrupt their living conditions and create barriers to healthcare access. Cost-sharing policies should recognise the different social protection needs of households.

[Case allocation of extensive operations on head and neck within the German DRG system 2004-2007: what is the net result of the continued developments in case allocation?]. / Analyse der Abbildungsqualität grosser operativer Eingriffe an Kopf und Hals in den G-DRG-Systemen 2004-2007: Was hat die Weiterentwicklung der Fallpauschalen gebracht?

BACKGROUND: When the German DRG system was implemented there was some doubt about whether patients with extensive head and neck surgery would be properly accounted for. Significant efforts have therefore been invested in analysis and case allocation of those in this group. The object of this study was to investigate whether the changes within the German DRG system have led to improved case allocation. METHODS: Cost data received from 25 ENT departments on 518 prospective documented cases of extensive head and neck surgery were compared with data from the German institute dealing with remuneration in hospitals (InEK). Statistical measures used by InEK were used to analyse the quality of the overall system and the homogeneity of the individual case groups. RESULTS: The reduction of variance of inlier costs improved by about 107.3% from the 2004 version to the 2007 version of the German DRG system. The average coefficient of cost homogeneity rose by about 9.7% in the same period. Case mix index and DRG revenues were redistributed from less extensive to the more complex operations. Hospitals with large numbers of extensive operations and university hospitals will gain most benefit from this development. CONCLUSION: Appropriate case allocation of extensive operations on the head and neck has been improved by the continued development of the German DRG system culminating in the 2007 version. Further adjustments will be needed in the future.

Evidence of cost shifting in California hospitals.

We used 1993-2001 data from private hospitals in California to investigate whether decreases in Medicare and Medicaid prices were associated with increases in prices paid for privately insured patients. We found that a 1 percent relative decrease in the average Medicare price is associated with a 0.17 percent increase in the corresponding price paid by privately insured patients; similarly, a 1 percent relative reduction in the average Medicaid price is associated with a 0.04 percent increase. These relationships imply that cost shifting from Medicare and Medicaid to private payers accounted for 12.3 percent of the total increase in private payers' prices from 1997 to 2001.

Assessment issues and the cost of schizophrenia.

A variety of factors must be considered in developing assessment procedures to evaluate the cost of schizophrenia. One is the definitional problem: definitions of schizophrenia have varied over time and space, with a tendency in recent years to narrow the concept substantially. These changes in definition, which reflect the increasing scientific rigor in psychiatry, make the task of establishing base rates, assessing morbidity and mortality, and ultimately determining the cost of schizophrenia more difficult. Efforts to assess the cost of schizophrenia must also take into account the fact that its cost is not simply monetary, nor can it be conceptualized using only the cost of treatment. The overall cost of schizophrenia also includes social and psychological costs experienced by patients and family members. The concept of "the overall cost" is discussed--the sum of costs to the patient (including suffering, loss of productivity, and mortality), the cost to the family (including suffering and loss of productivity), and cost of treatment (including medications, rehabilitation services, day hospitals, inpatient facilities, etc.). At present, standardized techniques are available only for assessing some aspects of patient costs, while assessments of family and treatment costs are relatively underdeveloped. Over the long run, reduction of the overall cost of schizophrenia is most likely to come from investment in research. The most effective way to reduce the overall cost is to develop improved treatments, to identify the pathophysiology and etiology of schizophrenia, and ultimately to identify ways to prevent it from occurring.

Prospective cost allocations for the chronic schizophrenic patient.

Schizophrenia affects from 0.5 percent to 1.0 percent of the population and is often a chronic relapsing illness with high morbidity. Because it strikes young adults, the lifetime direct and indirect costs are considerable. One method of budgeting the costs of treatment is through a prospective method with the development of "risk-adjusted" capitation rates that take into account a patient's past use of services, perceived health status, and level of disability. Such a system may provide opportunities to improve the quality of mental health services by increasing service flexibility, particularly in the development and differentiation of outpatient services. The essence of the approach is to encourage early intervention by reducing financial barriers for patients, especially barriers to alternatives to expensive inpatient services. One method currently employed in Rochester, New York, which creates a capitation payment system for the chronically mentally ill, will be described. The implications of this system for public policy will be discussed as we struggle to treat and care for chronic schizophrenic patients in humane and compassionate ways.

HMOs, moral hazard and cost shifting in workers' compensation.

Previous research has shown that workers respond to the economic incentives provided in workers' compensation. In particular, claim frequency rises with increased benefits, and claim duration, on net, seems to increase. Here we provide additional evidence of another incidence of behavioral responses to incentives. We find that doctors in health maintenance organizations (HMOs) have a greater tendency to classify claims as compensable under workers' compensation than do other physicians. Our evidence suggests that the rapid expansion of HMOs over the 1980-1990 period resulted in a significant increase in workers' compensation claim frequency.

Why did employee health insurance contributions rise?

We explore the causes of the dramatic rise in employee contributions to health insurance over the past two decades. In 1982, 44% of those who were covered by their employer-provided health insurance had their costs fully financed by their employer, but by 1998 this had fallen to 28%. We discuss the theory of why employers might shift premiums to their employees, and empirically model the role of four factors suggested by the theory. We find that there was a large impact of falling tax rates, rising eligibility for insurance through the Medicaid system, rising medical costs, and increased managed care penetration. Overall, this set of factors can explain more than one-half of the rise in employee premiums over the 1982-1996 period.

Strategic responses by hospitals to increased financial risk in the 1980s.

OBJECTIVE: This research addresses the following types of responses by hospitals to increased financial risk: (a) increases in prices to privately insured patients (testing separately the effects of risk from the effects of "cost-shifting" that depends on level of Medicare payment in relation to case mix-adjusted cost); (b) changes in service mix offered and selectivity in acceptance of patients to reduce risk; and (c) efforts to reduce variation in resource use for those patients admitted. DATA SOURCES: The database includes a national panel of over 400 hospitals providing information from patient discharge abstracts, hospital financial reports, and county level information over the period 1980-1987. STUDY DESIGN: Econometric methods suitable to panel data are implemented, with tests for pooling, hospital-specific fixed effects, and possible problems of selection bias. PRINCIPAL FINDINGS: The prices paid by private insurers to a particular hospital were affected by the changes in risk imposed by Medicare prospective payment, the generosity of Medicare payment, state rate regulation, and ability of the hospital to bear risk. The risk-weighted measure of case mix did not respond to changes in payment policy, but other variables reflecting the management of care after admission to reduce risk did change in the predicted directions. CONCLUSIONS: Some of the findings in this article are relevant to current Medicare policies that involve risk-sharing, for instance, special allowances for "outlier" patients with unusually high cost, and for sole community hospitals. The first type of allowance appears successful in preserving access to care, while the second type is not well justified by the findings. State rate regulation programs were associated not only with lower hospital prices but also with less risk reduction behavior by hospitals. The design of regulation as a sort of risk-pooling arrangement across payers and hospitals may be attractive to hospitals and help explain their support for regulation is some states.

Measuring hospital input price increases: the rebased hospital market basket.

The input prices indexes used in part to set payment rates for Medicare inpatient hospital services in both prospective payment system (PPS) and PPS-excluded hospitals were rebased from 1982 to 1987 beginning with payments for fiscal year 1991. In this article, the issues and evidence used to determine the composition of the revised hospital input price indexes are discussed. One issue is the need for a separate market basket for PPS-excluded hospitals. Also, the payment implications of using hospital-industry versus economywide measures of wage rates as price proxies for the growth in hospital wage rates are addressed.

Contributions of case mix and intensity change to hospital cost increases.

The 28-percent change in average Medicare inpatient cost per case between 1984 and 1987 is decomposed into three components: input price inflation, changes in average cost within diagnosis-related groups (DRGs) (intensity), and changes in the distribution of cases across DRGs (case mix). We estimate the contributions of technology diffusion and outpatient shifts to within-DRG and across-DRG cost changes. We also use California data to estimate the contribution of changes in the quantity of services provided during a stay. The factors examined account for approximately 80 percent of the real increase in average cost per case.

The incidence of mandated maternity benefits.

I consider the labor-market effects of mandates which raise the costs of employing a demographically identifiable group. The efficiency of these policies will be largely dependent on the extent to which their costs are shifted to group-specific wages. I study several state and federal mandates which stipulated that childbirth be covered comprehensively in health insurance plans, raising the relative cost of insuring women of childbearing age. I find substantial shifting of the costs of these mandates to the wages of the targeted group. Correspondingly, I find little effect on total labor input for that group.

Mental health reform in Georgia, 1992 to 1996.

In 1992 Georgia embarked on an ambitious reform of its public mental health system. Regional mental health authorities were created with consumers and family members as decision makers. Reform legislation required that hospital and community funds be combined to provide for flexible shifting of funds to communities as use of state hospitals decreased. However, after four years and at a cost of almost $15 million, few tangible results can be demonstrated. In fact, hospital admissions have increased since 1991. Further, a proposal for a Medicaid section 1115 waiver that would permit managed care organizations to assume responsibility for key decisions threatens to undermine the decision-making authority of regional mental health authorities. This paper summarizes the background leading to Georgia's reform, reviews its accomplishments, and suggests lessons to be gained from Georgia's experiences.

DRGs: the road to hospital efficiency.

In this paper, the effects of using diagnosis-related groups (DRGs) as the basis of a hospital funding mechanism and within a global budgeting mechanism are reviewed. Most forthcoming is the indeterminate effect of DRGs as a funding mechanism. By controlling only the price of hospital care, such systems remain vulnerable to compensatory increases in patient throughout, cost shifting and patient-shifting. Whether the use of DRGs has substantially reduced hospital cost per case is also not clear cut. Effects on patient outcome have not been adequately assessed. At this stage, use of DRGs within a system of global budgeting will simply focus attention on the current average costs of treating cases without consideration of whether such average costs represent efficient clinical practice. Efficient clinical practice is better established through use of less sophisticated techniques, such as clinical budgeting and cost-effectiveness analysis. The failure of more global budgeting in the past has been that patient outcome has not been monitored. Data on outcome are crucial to determining efficiency. Once efficient clinical practice is established through budgeting, DRGs could be calculated according to efficiency criteria rather than current average cost.

Impact of VA bed closures on use of state psychiatric services.

This study examined whether inpatient bed reductions at a Department of Veterans Affairs (VA) medical center increased VA patients' use of state mental health agency services. Veterans residing in two Connecticut cities who used VA psychiatric services during fiscal years 1993 through 1998 (n = 2,943) were identified from computerized files. Then their records were merged with state files. Coinciding with the time of VA bed closures, the proportion of VA patients who used any state services increased from 2.6%, 2.8%, and 2.7% from 1993 through 1995 to 3.6%, 3.5%, and 3.6% from 1996 through 1998 (p < .03). These changes reflect increased likelihood of state outpatient service use, but not inpatient services. No statistically significant changes occurred in the cost of state services used by VA patients. Bed closure impact may be reflected in increased cross-system service use, which may be a useful indicator of unmet needs resulting from system changes.

Dynamic cost shifting in hospitals: evidence from the 1980s and 1990s.

The purpose of this paper is to determine whether dynamic cost shifting occurred among acute care hospitals during the period from the early 1980s to the early 1990s and, if so, whether market factors affected the ability to shift costs. Evidence from this study of California acute care hospitals during three time intervals shows that the hospital did practice dynamic cost shifting, but that their ability to shift costs decreased over time. Surprisingly, hospital competition and HMO penetration did not influence cost shifting. However, increasing HMO penetration (measured as the HMO percentage of hospital discharges) did decrease both net prices and costs for the early part of the study, but later was associated with increases in both.

Pharmacoutilization of statin therapy after acute myocardial infarction. A real practice analysis based on administrative data.

BACKGROUND: Despite randomized and controlled trials indicating continuous treatment with statin therapy as a factor in reducing morbidity and mortality after acute myocardial infarction, records reveal a high percentage of patients at risk who are either not receiving treatment or being treated inadequately. METHODS: An administrative database kept by the Local Health Unit of Ravenna and listing patient baseline characteristics, drug prescriptions and hospital admissions was used to perform: 1) an analysis of patients discharged alive from hospital each year between 1996 and 2000 with a diagnosis of acute myocardial infarction, and 2) a retrospective cohort study of drug utilization, and particularly the use of statins, year by year. All prescriptions for statins filled in the 6 months after hospital discharge were considered and used to classify patients in terms of their exposure to statin therapy and of their pharmacoutilization. RESULTS: A total of 2265 subjects were enrolled (446 in 1996, 440 in 1997, 443 in 1998, 443 in 1999, and 493 in 2000). The percentage of patients treated with statins increased each year (from 22.6% in 1996 to 43.8% in 2000) as did the percentage of adequately dosed patients (from 4.3% in 1996 to 23.9% in 2000). The overall cost of dispensed statins amounted to 10,610 euros in 1996 and 45,102 euros in 2000. The proportion of cost for statins accountable to adequately dosed patients ranged from 36.4% in 1996 to 77.4% in 2000. The average cost per adequately dosed patient ranged from 203.40 euros in 1996 to 296.00 euros in 2000 and increased year by year. CONCLUSIONS: Pharmacoutilization of statin therapy was found to be unsatisfactory in each study year. Interestingly, however, the trend indicated by the study suggests increasing percentages of patients being exposed to the treatment, and of adequately dosed patients. These results may be attributed to a greater awareness of the need for proper treatment, and may be considered as reflecting a significant improvement in drug management.