Maryland's Experiment With Capitated Payments For Rural Hospitals: Large Reductions In Hospital-Based Care.

In 2010 Maryland replaced fee-for-service payment for some rural hospitals with "global budgets" for hospital-provided services called Total Patient Revenue (TPR). A principal goal was to incentivize hospitals to manage resources efficiently. Using a difference-in-differences design, we compared eight TPR hospitals to seven similar non-TPR Maryland hospitals to estimate how TPR affected hospital-provided services. We also compared health care use by "treated" patients in TPR counties to that of patients in counties containing control hospitals. Inpatient admissions and outpatient services fell sharply at TPR hospitals, increasingly so over the period that TPR was in effect. Emergency department (ED) admission rates declined 12 percent, direct (non-ED) admissions fell 23 percent, ambulatory surgery center visits fell 45 percent, and outpatient clinic visits and services fell 40 percent. However, for residents of TPR counties, visits to all Maryland hospitals fell by lesser amounts and Medicare spending increased, which suggests that some care moved outside of the global budget. Nonetheless, we could not assess the efficiency of these shifts with our data, and some care could have moved to more efficient locations. Our evidence suggests that capitation models require strong oversight to ensure that hospitals do not respond by shifting costs to other providers.

States of emergency. As fiscal challenges increasingly overwhelm their budgets, states brace for the Bush administration's Medicaid plan.

With a host of other expensive issues leading President Bush's agenda, officials fear Medicaid could suffer some hard blows. States are already carving out efficiencies, even as enrollment swells. New HHS Secretary Mike Leavitt, left, last week said he saw an opportunity to revamp coverage for some Medicaid recipients. "Wouldn't it be better to give Chevys to everyone, rather than Cadillacs to a few?" he asked.

Patients at risk: health reform and risk adjustment.

The Clinton proposal recognizes the need for successful risk adjustment and calls for the National Health Board to promulgate a risk adjustment formula by 1 April 1995. Unfortunately, risk adjustment technology is primitive; using observable characteristics such as age only slightly ameliorates the flawed incentives of not adjusting at all. Without major improvements in risk adjustment technology we face a trade-off between giving plans an incentive to select good risks and an incentive to produce at lowest cost. Pure capitation maximizes both incentives; pure fee-for-service minimizes both. I suggest experimentation with paying plans partly on the basis of risk-adjusted capitation and partly on the basis of a fee schedule reflecting actual use (partial capitation). In the draft Clinton plan, the option given to alliances not to offer plans priced above 120 percent of the weighted average premium appears to assume better risk adjustment ability than is now possible. This option should be relaxed or abandoned.

Employer-based health insurance in a changing work force.

The loss of manufacturing jobs and the expansion of service jobs and part-time employment have contributed to a decline in the rate of employer-sponsored health insurance among workers. Not only does manufacturing provide more of its own workers with coverage compared with other industry groups, but it also is a significant net "exporter" of coverage to dependent workers in other industries. In 1991 the net export of coverage represented a 20 percent tax on manufacturing employers per covered worker, while professional services--the fastest-growing industry group-collected a subsidy from other industry groups equal to more than 12 percent per covered worker. Similarly, larger firms--those that employed 100 workers or more--paid a self-imposed tax of as much as 13 percent per covered worker to support dependent workers employed in smaller firms.

The Clinton plan: what happened to the tough choices?

This paper points out four difficult choices embedded in the Clinton plan. First, universal coverage is achieved, but with regressive head-tax financing on many workers-since the cost of the employer mandate ultimately will fall on workers' wages. Perhaps such an approach can be made politically acceptable. Second, cost containment is entrusted to global spending limits, which will limit the rate of improvement in quality. Third, the offering of choice among a variety of health plans of different costs and quality, although desirable in itself, may lead to inequity. Finally, the plan's financing will make it difficult for voters to tell what trade-offs they are making, because employer mandates and budget cuts disguise choices.

The role of risk adjustment in national health reform.

Efforts to contain health insurance costs through competitive strategies are undermined by the economic incentive facing buyers and sellers to avoid high-risk individuals. To deal with this problem, proponents of competitive strategies, in which cost containment would be achieved by having consumers move to the most efficient health plans, suggest developing risk-assessment methods and using them to make transfer payments from plans enrolling relatively healthier people to plans with relatively sicker ones. Effective risk adjustment is also of interest to payers such as Medicare, large employers offering multiple-choice programs, and risk-bearing providers seeking fair compensation. So far, however, the ability to predict the variability of future medical costs on an individual basis is very limited. In a market in which individuals are free to change plans annually, the potency of current risk-adjustment technology would leave plans with ample incentive to attract healthier people and to avoid sicker people. The state of current risk-assessment methods leads some analysts to advocate a mixed payment system, partly based on a risk-adjusted prospective payment and partly based on retrospective adjustments made once competing plans' actual experiences are known. New York State is trying such an approach. Many analysts emphasize the importance of other insurance reforms and the institutional framework in which risk adjustments might be made as key factors in helping such a process succeed.(ABSTRACT TRUNCATED AT 250 WORDS)

"Flat" versus "weighted" reimbursement formulas: a longitudinal analysis of statewide special education funding practices.

Tennessee data were analyzed longitudinally from 1979-80 to 1987-88 in terms of numbers of children placed in a variety of service options. In 1983-84, the Tennessee funding formula was changed from a "flat" rate to a "weighted" formula. The weighted formula was associated with a statistically significant decrease in less restrictive placements and a reliable increase in more restrictive placements. A statewide survey of district special education directors suggested that service needs may have been more likely than monetary incentives to explain the observed changes.

Risky business: how insurance companies gamble with your health coverage.

Under a patchwork of state laws and virtually no federal oversight, a decade of risky investments, questionable business dealings, lavish spending, and help-yourself ethics in the insurance industry is playing a hidden role in the crisis in affordable medical coverage. Skyrocketing medical costs are the main culprit, but financial losses have put pressure on insurers to raise premiums and cancel risky policyholders. The losses also are a major factor in the sharp increase in life/health insurance company failures, which can leave policyholders stranded.

Reallocation in academic dentistry: a legal and administrative perspective.

Like other elements in higher education, academic dentistry is experiencing financial austerity and must be able to reallocate its resources in order to provide the optimal level of service within a given budget. Continuous, across-the-board budget cuts will only reduce the quality of strong departments to the level of weak ones. Dental college faculty, with guidance and support from administrators, will need to develop procedures and criteria for program restructuring that will increase educational flexibility and link budgeting with planning. Seniority and tenure may be used as criteria for personnel action, but faculty must be aware that tenure is a method to achieve academic freedom and is not a guarantee of perpetual employment. The courts will not substitute their judgment for that of the university authorities in academic or personnel matters unless the institution's action is arbitrary, capricious, or discriminatory.

Medicare program; hospital-based skilled nursing facility cost limits effective for cost reporting periods beginning October 1, 1982, and July 1, 1984--HCFA. Final notice.

This schedule of limits revises the single Medicare reimbursement limit that was published in the Federal Register (47 FR 42894) on September 29, 1982 insofar as that notice applied to hospital-based skilled nursing facility (SNF) inpatient routine service costs. Freestanding SNF cost limits are not affected by this notice.

Medicare program; update to freestanding and hospital-based skilled nursing facility cost limits effect for cost reporting periods starting May 1, 1986--HCFA. Final notice.

This notice sets forth a revised schedule of limits on skilled nursing facility inpatient routine service costs that are reimbursed under Medicare. This schedule applies to cost reporting periods beginning on or after May 1, 1986.

Cost allocation plans for public assistance programs--Health and Human Services Department. Interim final rule with comment period.

This rule revises existing regulations concerning the preparation, submission and approval of State agency cost allocation plans used in computing claims for Federal Financial Participation under public assistance programs. It also reflects the transfer of responsibility for review and approval of the plans to the Division of Cost Allocation (DCA) in the Department's regional offices. This responsibility was previously assigned to the Social and Rehabilitation Service which was abolished by Secretarial Order published on March 9, 1977 (42 FR 13262). The current rule has been rewritten so that it is clearer, easier to understand and more specific. The Department's Informal Grant Appeals regulation relative to cost allocation plans and indirect cost rates (45 CFR Part 75) is also being updated and revised to make it consistent with Supart E, Cost allocation plans, of 45 CFR Part 95, General administration--grant programs (public assistance and medical assistance). Although these regulations are final, the Department has decided to invite public comments for the reasons described in the Supplementary Information below. Comments may be submitted in the manner described below. If changes are needed as a result of the comments received, those changes will be published in the Federal Register along with the comments received and the Department's responses to those comments.

Medicare program; limited additional opportunity to request certain hospital wage data revisions for FY 1999--HCFA. Final rule with comment period.

This final rule with comment period provides hospitals with a limited additional opportunity to request certain revisions to their wage data used to calculate the FY 1999 hospital wage index. In addition, it explains the criteria that must be met to request a revision, the types of revisions that will be considered, the procedures for requesting a revision, the implementation of wage index revisions, and other related issues. Requests for wage data revisions must be received by the date and time specified in the "DATES" section of this preamble. We will implement revisions to the hospital wage index in accordance with this final rule with comment period on a prospective basis only.

Medicare program; schedule of limits on home health agency costs per visit for cost reporting periods beginning on or after July 1, 1989--HCFA. Final notice.

This final notice sets forth a revised schedule of limits on home health agency costs that may be paid under the Medicare program. This revised schedule of limits applies to cost reporting periods beginning on or after July 1, 1989 and before July 1, 1991. As required by section 6222 of the Omnibus Budget Reconciliation Act of 1989 (Pub. L. 101-239), the revised schedule of limits incorporates the hospital wage index in effect for cost reporting periods beginning prior to July 1, 1989.

Medicare and Medicaid; payment for the cost of malpractice insurance--HCFA. Interim final rule with comment period.

In this final rule we are adopting an apportionment methodology for determining reasonable cost reimbursement for hospital malpractice insurance costs. The new apportionment policy for hospitals will divide total malpractice insurance premium cost into two components. The "administrative component," which accounts for 8.5 percent of total premium cost, will be included in the General and Administrative cost center and will be apportioned on the basis of the individual hospital's Medicare utilization rate. The "risk component," which comprises 91.5 percent of total cost, will be apportioned on the basis of a formula that takes into account the individual hospital's utilization as well as the national Medicare patient utilization rate and the national Medicare malpractice loss ratio (as adjusted to account for associated claims handling costs). Effectively, the "scaling factor formula" will relate the national utilization rate to the adjusted national loss ratio. As a hospital's own utilization rate exceeds or falls below the national utilization rate, the risk component will be reimbursed on the basis of a "scaling factor" that is more or less than the national Medicare malpractice loss ratio. Different apportionment policies are being adopted for Medicare skilled nursing facilities and for providers of services under the Medicaid and Maternal and Child Health programs. This final rule replaces our current apportionment policy for reimbursement of malpractice insurance costs and is applicable, subject to the rules of reopening and administrative finality, to cost reporting periods beginning on or after July 1, 1979.

Medicare program; schedule of per-beneficiary limitations on home health agency costs for cost reporting periods beginning on or after October 1, 1997--HCFA. Final rule with comment period.

This final rule with comment period sets forth, in accordance with section 4602 of the Balanced Budget Act of 1997, a new schedule of limitations on home health agency costs that may be paid under the Medicare program for cost reporting periods beginning on or after October 1, 1997. These limitations are in addition to the per-visit limitations that were set forth in our January 2, 1998 notice with comment period.

Medicare program; schedule of limits on home health agency costs per visit for cost reporting periods beginning on or after October 1, 1997--HCFA. Notice with comment period.

This notice sets forth a revised schedule of limits on home health agency costs that may be paid under the Medicare program for cost reporting periods beginning on or after October 1, 1997. These limits replace the per visit limits that were set forth in our July 1, 1996 notice with comment period (61 FR 34344) and supersede those set forth in our July 1, 1997 notice with comment period (61 FR 35608). This notice also provides, in accordance with the Balanced Budget Act of 1997, that there be no changes in the home health per visit limits for cost reporting periods beginning on or after July 1, 1997 and before October 1, 1997 (that is, the cost limits set forth in our July 1, 1996 notice will apply to cost reporting periods beginning during this time period); that the establishment of the cost per visit limitations for cost reporting periods beginning on or after October 1, 1997 be based on 105 percent of the median of the labor-related and nonlabor per visit costs for freestanding home health agencies; that there be no updates in the home health costs limits (including no adjustments for changes in the wage index or other updates) for cost reporting periods beginning on or after July 1, 1994 and before July 1, 1996; and the wage index value that is applied to the labor portion of the per visit limitations be based on the geographic area in which the home health service is furnished.