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PubMed1996

Centers of excellence: an assessment tool for cardiovascular and orthopedic programs.

As payers place more weight on contracting with hospital/health system programs that can differentiate themselves in the market as a "true" center of excellence (COE), it becomes imperative that hospitals/health systems understand the payer perspective about those programmatic attributes that can truly differentiate them from other programs. This report describes an evaluation and rating methodology for hospital/health system subspecialty programs, particularly cardiovascular and orthopedic programs, that can be used as a self-assessment tool. Using as its core a Rating Scale and Ranking Taxonomy, the evaluation and rating methodology presented here allow cardiovascular and orthopedic programs to do the following: Understand the differentiating characteristic of COE. Rate itself against detailed criteria that are being used by payers. Compare aspects of its program to premier or benchmark programs. Interpret the results to assist with strategic and operational direction. Allocate scarce resources to implement a subspecialty program that will attract payers. The Rating Scale and Ranking Taxonomy has 20 criteria for assessing cardiovascular programs and 18 criteria for orthopedic programs. The assessment process is designed to produce two important results: dialogue and action. The underpinnings of any action is a solid business plan that clarifies the program's vision, values, and mission. They are important because most programs will ultimately pursue very similar strategies and tactics; however, the most successful subspecialty programs and practices will be the ones that can execute the strategies and tactics quickly and effectively. In addition, the changes that are engendered by this targeted yet comprehensive assessment process can lead to improved clinical and functional outcomes for patients, as well as systemic improvements in the delivery of care.

American Hospital Association↗

PubMed1996

Hospital cost shifting, a continuing debate.

This Issue Brief examines the evidence on hospital cost shifting. It defines cost shifting, explores the incentives facing hospitals and payers, reviews and critiques the new evidence on cost shifting, and discusses the policy concerns that arise from the new learning. Cost shifting has a precise and easily understood meaning. It does not mean that some payers pay different prices than others. Different prices are commonplace throughout the economy. Rather, cost shifting exists when the prices faced by one group of payers are higher because another group pays less. To be able to cost shift, a hospital must have market power, and it must not yet have fully exercised that power. There has been a spate of recent cost-shifting studies. The better known studies focus on industrywide, revenue-to-cost margins by payer. They find that the extent of cost shifting declined in the mid-1990's. The methods underlying these studies have been criticized in the academic literature, with the strong suggestion that the studies overstate any true cost shifting. Cross-sectional studies compared measures of prices across individual hospitals. These studies have failed to find evidence of hospital cost shifting. However, they suffer from a potential inability to control for levels of service, quality, and amenities that may simultaneously have changed as well. Dynamic studies compare individual measures of hospital prices through time and allow each hospital to serve as its own control. These studies find no evidence of hospital cost shifting. As one analysis concluded: "We found no evidence to suggest that cost-shifting strategies that might protect hospital revenues in the face of financial pressure were undertaken successfully." Rather than cost shifting, the existing evidence points to hospital competition limiting the provider's ability to raise prices. Whatever market power hospitals once enjoyed is disappearing--and with it the ability to cost shift. This research suggests that Medicare reform or Medicaid restructuring will have little direct effect on the hospital prices that employers and their workers pay for health care. The author argues that cost shifting is dead. However, the increased hospital competition necessarily squeezes hospital profits. This reduces the amount of charity care they can provide. Expect to see more and more examples of hospitals unable to provide care to nonpaying patients. This also suggests that care for the indigent will become a more pronounced public issue. This is a form of "cost" shifting, one that the "system" will need to deal with.

Cost Allocation↗

PubMed1997

Economic winners and losers after introduction of an effective new therapy depend on the type of payment system.

An effective therapy for a costly illness has economic consequences. There may also be differences between provider costs and payer costs and initial versus long-term costs; costs may also vary with the reimbursement scheme. Consider the case of an effective therapy to prevent restenosis after coronary angioplasty. Assume that the initial provider cost of angioplasty is $12,000 and that restenosis within 6 months results in repeat angioplasty in 20% of cases, with a follow-up cost of $2,400, or $14,400 total. Assume that a therapy costs $1,000 per angioplasty and decreases restenosis by 50%, resulting in repeat angioplasty in 10% of cases. This will result in an initial cost of $13,000 and a follow-up cost of $1,300, or $14,300 total. The total societal costs will be -$100, a slight savings. Thus, the $1,100 cost of therapy is offset by reduced costs associated with restenosis, and the societal costs are almost neutral. Assume that under fee for service providers charge costs plus 10% and that without the new therapy either a package price or a capitated system is revenue neutral. Changes in costs resulting from therapy to prevent restenosis are as follows (plus sign indicates cost or loss; minus sign indicates savings or profit): [table: see text] Under fee for service, the payer takes the risks, and the economic consequences to providers are minimal. The situation is reversed under capitation. For whoever takes the risk, there is an initial loss to pay for the therapy, but a long-term gain due to less restenosis. Under package pricing, the providers lose because of the cost of therapy and fewer procedures, while the payers gain. A new therapy, even if it is revenue neutral to society overall, may have considerable economic consequences, which vary with time and with the different perspectives of providers and payers.

Angioplasty, Balloon, Coronary↗

PubMed1998

The economic functions of carve outs in managed care.

This paper considers the economic functions of contracting separately for a portion of the insurance risk, offering both the payer's (i.e., employer's) and the health plan's perspective. Four major forms of carve outs are discussed: (1) payer specialty carve outs from all health plans; (2) payer specialty carve outs from only indemnity and preferred provider organization arrangements; (3) individual health plan carve outs to specialty vendors; and (4) group practice carve outs to specialty organizations. The paper examines whether carving out care fosters the payer's goal of delivering reasonable healthcare efficiently, how adverse selection affects the provision of healthcare, and the costs of providing this specialized care.

Capitation Fee↗

PubMed1998

Physician report cards more prevalent among MCOs, but do they work?

At least one payer is releasing public report cards on physicians, and others are expected to follow. Experts say it is unlikely payers will go through the expense of creating these report cards for hospitals. However, they do believe payers will increasingly ask hospitals to release their own clinical and patient satisfaction data as part of the managed care contracts. They say this is a two-part trend: First, payers are being forced by competition to find new ways to market their plans to employers and the public. Second, there is a national push to hold physicians and other providers more accountable to the public.

Benchmarking↗

PubMed1998

Who should determine the medical necessity of dental sedation and general anesthesia? A clinical commentary supported by Illinois patient and practitioner surveys.

Many third-party payers try to deny benefits for dental sedation and general anesthesia. The term "not medically necessary" is often applied to these services by third-party payers. The label is poorly defined and varies from payer to payer. This paper uses original practitioner and patient opinion surveys to support the position that the definition of medical necessity is solely the joint responsibility of the patient and his/her physician. These surveys also support the argument that both patients and practitioners view dental sedation and general anesthesia as a medically necessary procedure if it allows a patient to complete a medically necessary surgical procedure that he/she might otherwise avoid.

Anesthesia, Dental↗

PubMed1999

Correlates of low back pain outcomes in a community clinic.

UNLABELLED: Both governmental and private agencies have focused on the multiple outcome variables that may affect patient treatment. Our investigation examined treatment-independent outcome variables and correlates in patients with the sole complaint of low back pain. Treatment was conducted in an outpatient physical therapy clinic serving a rural/suburban Tennessee population. METHODS: The review collected data on nine variables from 54 clinic records. The study group was 56% female, with ages for all subjects ranging from 26 to 84 years. Twenty-five patients carried private insurance, 14 were TennCare recipients (state Medicaid), 9 were covered by workers compensation, and 6 were Medicare based. The prescribed number of treatment sessions (Rx) varied from 1 to 3 visits to as many as 18. RESULTS: The Rx was not related to sex, age, or payer type. The compliance index (Cx) (mean = 76.3%, range = 6% to 150%) was related to payer type (P < .02), but not related to sex, age, or Rx. TennCare patients had lower compliance levels (mean Cx = 51.1) than all other insurer groups combined (mean Cx = 85.0). Self-assessed improvement by the patient (Patient Status) was related to Cx (P < 0.005) but not sex, age, payer type, or Rx. Completion by the patient of long-term physical therapy goals as determined by the therapist was related to Cx (P < .03) and self-assessed patient status (P < .02), while disposition at discharge was associated with Cx, self-assessed patient status, and payer type (P < .001). DISCUSSION: Compliance by patients significantly influences the outcome measures of self-assessed improvement, therapist assessment of achieving long-term treatment goals, and disposition at discharge. TennCare patients demonstrated both low compliance and poor outcome at discharge. These results suggest that the lower potential for positive treatment outcome may exist for the TennCare patient population.

Adult↗

PubMed1999

Annual audits of IDS risk contract settlements improve payment accuracy.

Integrated delivery systems (IDSs) should conduct annual audits of payers' settlements under risk contracts to verify that the payer attributed the appropriate amounts of revenue and charged the appropriate claims expenses to the IDS. In particular, IDSs should verify that payers calculated revenues and expenses based on consistent member counts and that the determined commercial revenue was based on the actual premiums paid. IDSs also should determine whether payers have used appropriate demographic factors and countywide rates as a basis for determining Medicare revenue, charged the IDS for claims only for valid members, paid capitated providers the correct capitation amounts, and used appropriate historical data to estimate the amounts of incurred-but-not-reported claims attributed to the IDS.

Accounts Payable and Receivable↗

PubMed2003

Impact of Maine's Medicaid drug formulary change on non-Medicaid markets: spillover effects of a restrictive drug formulary.

BACKGROUND: Market penetration of HMOs affect physician practice styles for non-HMO patients. OBJECTIVE: To study the impact of a restrictive Medicaid drug formulary on prescribing patterns for other patients, ie, so-called spillover effects. DESIGN: A before-and-after, 3-state comparison study. EVENT: On January 1, 2001, Maine's Medicaid program implemented a restrictive drug formulary for the proton pump inhibitor class, with pantoprazole as the only preferred drug. MAIN OUTCOME MEASURE: The Medicaid and non-Medicaid market shares of pantoprazole in Maine (vs New Hampshire and Vermont and among Maine physicians with different Medicaid share of practice. RESULTS: After 3 months, the market share of pantoprazole in Maine (vs 2 control states) increased 79% among Medicaid prescriptions (vs 1%-2%), 10% among cash prescriptions (vs 3%), and 7% among other third-party payer prescriptions (vs 1%). The market shares increased more among Maine physicians with a higher Medicaid share of practice (high vs middle vs low [market]: 16% vs 8% vs 5% [cash]; 11% vs 5% vs 4% [other third-party payers]). Linear regression results indicate that practicing medicine in Maine leads to a 72% increase in pantoprazole share among Medicaid prescriptions (P < .001). In addition, for each 10% Medicaid share of practice in Maine, the share of pantoprazole increases 1.8% among cash prescriptions (P = .01) and 1.4% among other third-party payer prescriptions (P < .001). CONCLUSIONS: Maine's Medicaid drug formulary generated spillover effects in cash and other third-party payer markets, with somewhat stronger effects in the cash market.

2-Pyridinylmethylsulfinylbenzimidazoles↗

PubMed1987

The distributional implications of using relative prices in DRG payment systems.

Decisions by state Medicaid programs and other third-party payers to use DRGs as the basis of hospital payment require the resolution of numerous technical design issues, including determining relative price schedules, that are likely to have important distributional implications for payers and hospitals. At issue is the development of price schedules that reflect average resource use in the populations using DRG reimbursement. An examination of differences between the Medicare relative prices and other relative prices based on different populations in New York State revealed that significant cross-subsidies among payers and hospitals would occur if Medicare relative prices were used as the basis of payment for patients outside the Medicare program. Such unintended cross-subsidies would compromise a major goal of DRG payment: to reduce "inequitable" charge and cost differentials among third-party payers.

Blue Cross Blue Shield Insurance Plans↗

PubMed1998

The Hawaii Poison Center: what's it worth to you?

Benefits of the Hawaii Poison Center (HPC) to the public, providers, and third party payers are enumerated. Financial advantages to third party payers during 1996-7 were quantified by comparing costs for the home management of poisonings with alternative sources of care reported by callers, if the HPC were closed. The value for third party payers exceeded $2.5 million, greater than eight times the investment in operating the HPC, similar to national data. Since third party payers are the most visible beneficiary of cost savings, a case is made for their financial support of the HPC.

Costs and Cost Analysis↗

PubMed1998

Quality management in medical specialties: the use of channels and dikes in improving health care in The Netherlands.

BACKGROUND: In 1989 a Dutch national policy was instituted to ensure that quality management is the responsibility of both health care professionals and management, with input from insurers and patients. In turn, quality management of medical specialists remained to a large extent self-regulatory, with accountability toward third-party payers and patients. Three programs for quality management-peer review, guidelines, and visitation-have sufficiently persuaded patient organizations and care insurers about medical specialists' ability to ensure the quality of the care they provide. PEER REVIEW: Operational since 1976, the national program for peer review in hospitals has stressed the need for explicit evaluative mechanisms. This program led to the foundation of the National Organization for Quality Assurance in Hospitals (CBO), which conducts peer review activities but also support efforts aimed at quality assurance in hospitals. Once it is linked with the other two quality management programs, peer review will realize its full potential as a profession-based method for standardizing and rationalizing medical specialty practice. PRACTICE GUIDELINES: Since 1982, more than 60 consensus guidelines have been developed for and by medical professionals, with input from patient organizations and third-party payers. Medical specialty associations have also created their own guidelines. Although the guidelines' impact has not been evaluated systematically, studies have shown effects on behavioral change and health outcomes. Solid, credible guidelines continue to be developed, although the successful implementation of these guidelines needs to be studied. VISITATION PROGRAM: Visitation, or onsite assessment of specialty practice sites (in training and non-training hospitals), has been a hot issue in Dutch medical quality assurance. All 28 scientific societies have visitation programs, focusing on areas for improvement such as process management, use of guidelines, and evaluation of patient satisfaction and treatment outcomes. Closely linked to other medical quality assurance activities, visitation programs also incorporate clinical guidelines into evaluations. CONCLUSIONS: Profession-driven peer review, practice guidelines, and visitation programs have been effective support tools for quality management in The Netherlands. Future challenges involve creating more synergy among these programs and between the profession-based quality management approaches and recently introduced hospital-based quality systems and maintaining the trust between third-party payers and patients.

Delivery of Health Care↗

PubMed2006

Cost-effectiveness of continuous positive airway pressure therapy for moderate to severe obstructive sleep apnea/hypopnea.

BACKGROUND: Obstructive sleep apnea/hypopnea (OSAH) is a common disorder characterized by recurrent collapse of the upper airway during sleep, and is associated with an increased risk of motor vehicle crashes (MVCs). Common first-line therapy for OSAH is continuous positive airway pressure (CPAP). We assessed the cost-effectiveness of CPAP therapy vs none for the treatment of OSAH. METHODS: We used a 5-year Markov model that considers the costs and quality-of-life improvements of CPAP therapy, accounting for the gains from reduced MVC rates. Utility values were obtained from published studies. The MVC rates under the CPAP and no-CPAP scenarios were calculated from National Highway Traffic Safety Administration data and a systematic review of published studies. Costs of MVCs, equipment, and physicians were obtained from US Medicare and the National Highway Traffic Safety Administration. The target population included male and female patients aged 25 to 54 years and newly diagnosed as having moderate to severe OSAH. We examined the findings from the perspectives of a third-party payer and society. RESULTS: From a third-party payer or a societal perspective, CPAP therapy was more effective but more costly than no CPAP, with incremental cost-effectiveness ratios of $3354 or $314 per quality-adjusted life-year gained, respectively. The incremental cost-effectiveness ratio estimate was most dependent on viewpoint (varying more than 10-fold between societal and third-party payer perspectives) and choice of utility measurement method (varying more than 5-fold between the use of standard gamble and EuroQol 5D utility assessment values). CONCLUSION: When quality of life, costs of therapy, and MVC outcomes are considered, CPAP therapy for patients with OSAH is economically attractive.

Adult↗

PubMed1999

Measuring costs of guideline-driven mental health care: the Texas Medication Algorithm Project.

BACKGROUND: Algorithms describe clinical choices to treat a specific disorder. To many, algorithms serve as important tools helping practitioners make informed choices about how best to treat patients, achieving better outcomes more quickly and at a lower cost. Appearing as flow charts and decision trees, algorithms are developed during consensus conferences by leading experts who explore the latest scientific evidence to describe optimal treatment for each disorder. Despite a focus on "optimal" care, there has been little discussion in the literature concerning how costs should be defined and measured in the context of algorithm-based practices. AIMS OF THE STUDY: This paper describes the strategy to measure costs for the Texas Medication Algorithm project, or TMAP. Launched by the Texas Department of Mental Health and Mental Retardation and the University of Texas Southwestern Medical Center at Dallas, this multi-site study investigates outcomes and costs of medication algorithms for bipolar disorder, schizophrenia and depression. METHODS: To balance costs with outcomes, we turned to cost-effectiveness analyses as a framework to define and measure costs. Alternative strategies (cost-benefit, cost-utility, cost-of-illness) were inappropriate since algorithms are not intended to guide resource allocation across different diseases or between health- and non-health-related commodities. "Costs" are operationalized consistent with the framework presented by the United States Public Health Service Panel on Cost Effectiveness in Medicine. Patient specific costs are calculated by multiplying patient units of use by a unit cost, and summing over all service categories. Outpatient services are counted by procedures. Inpatient services are counted by days classified into diagnosis groups. Utilization information is derived from patient self-reports, medical charts and administrative file sources. Unit costs are computed by payer source. Finally, hierarchical modeling is used to describe how costs and effectiveness differ between algorithm-based and treatment-as-usual practices. DISCUSSION: Cost estimates of algorithm-based practices should (i) measure opportunity costs, (ii) employ structured data collection methods, (iii) profile patient use of both mental health and general medical providers and (iv) reflect costs by payer status in different economic environments. IMPLICATION FOR HEALTH CARE PROVISION AND USE: Algorithms may help guide clinicians, their patients and third party payers to rely on the latest scientific evidence to make treatment choices that balance costs with outcomes. IMPLICATION FOR HEALTH POLICIES: Planners should consider consumer wants and economic costs when developing and testing new clinical algorithms. IMPLICATIONS FOR FURTHER RESEARCH: Future studies may wish to consider similar methods to estimate costs in evaluating algorithm-based practices.

Journal Article↗

PubMed2000

Effects of health insurance and race on breast carcinoma treatments and outcomes.

BACKGROUND: The authors hypothesized that insurance payer and race would influence the care and outcomes for patients with breast carcinoma. METHODS: The authors examined treatments and adjusted risk of death (through 1997) for all incident cases of breast carcinoma occurring in Florida in 1994 (n = 11,113) by using state tumor registry data. RESULTS: Patients lacking health insurance were less likely to receive breast-conserving surgery (BCS) compared with patients who had private health insurance. Among patients insured by Medicare, those belonging to a health maintenance organization (HMO) were more likely to receive BCS but less likely to receive radiation therapy after BCS. Non-Hispanic African Americans had higher mortality rates even when stage at diagnosis, insurance payer, and treatment modalities used were adjusted in multivariate models (adjusted risk ratio [RR], 1.35; 95% confidence interval [CI], 1.12-1.61; P = 0.001). Patients who had HMO insurance had similar survival rates compared with those with fee-for-service (FFS) insurance. Among non-Medicare patients, mortality rates were higher for patients who had Medicaid insurance (RR, 1.58, 95% CI, 1.18-2.11; P = 0.002) and those who lacked health insurance (RR, 1.31; 95% CI, 1.03-1.68; P = 0.03) compared with patients who had commercial FFS insurance. There were no insurance-related differences in survival rates, however, once stage at diagnosis was controlled. CONCLUSIONS: As a result of later stage at diagnosis, patients with breast carcinoma who were uninsured, or insured by Medicaid, had higher mortality rates. Mortality rates were also higher among non-Hispanic African Americans, a finding that was not fully explained by differences in stage at diagnosis, treatment modalities used, or insurance payer.

Black or African American↗

PubMed2004

Hematopoietic stem cell transplantation among patients with leukemia of all ages in Texas.

BACKGROUND: Hematopoietic stem cell transplantation (HSCT) is an effective but expensive medical procedure to which some ethnic minorities, the elderly, and those without insurance have been shown to have limited access. The purpose of the current study was to determine whether socioeconomic factors were associated with HSCT usage rates in patients with leukemia. METHODS: The authors identified 6574 patients with acute lymphocytic leukemia, chronic lymphocytic leukemia, acute myelogenous leukemia, chronic myelogenous leukemia, or other leukemias from the 1999 Texas Hospital Inpatient Discharge Public Use Data File. Of these patients, 1604 received an autologous or allogeneic HSCT. The authors assessed patients' ethnicity, payer status, age, gender, and comorbid medical conditions. Logistic regression was used to control for patient characteristics and to evaluate associations among payer status, ethnicity, and HSCT use. P < or = 0.05 indicated statistical significance. RESULTS: Patients who self-paid had the highest rate of HSCT use in all age groups (32%; P < or = 0.01) and in the adult group (36%; P = 0.11). Elderly patients with Medicare had a low rate of HSCT use (17%; P = 0.13). Logistic regression showed no statistically significant associations between payer status or ethnicity and HSCT use. However, elderly women were significantly less likely to undergo HSCT than elderly men (odds ratio, 0.34; P < or = 0.01). CONCLUSIONS: The lack of statistically significant differences in HSCT use among adult patients with leukemia was surprising because previous studies had shown differences in HSCT by ethnicity and insurance.

Adolescent↗

PubMed1991

Changing cancer care in the 1990s and the cost.

Progress in cancer research in the 1980s has led to predictions of a technologic explosion in the 1990s. Yet, with this progress there has been a groundswell of protest at the rapidly escalating costs of health care. More than $600 billion was spent on health care in 1989 and estimates of $1.5 trillion are made for the year 2000. Repeated attempts at cost containment have failed. It has been suggested that only by retarding technologic advances will we be able to control costs. Many observers believe that rationing of health care is the only solution, but new technology not only improves cancer care, it often decreases cost. It is not rational to retard advances that may later reduce costs, nor is it humane to retard advances that improve care, even if they cost more. In identifying priorities we should begin with the principle that treatments be restricted to clinical trials unless they have been demonstrated to prolong survival or improve the quality of life. If the payers reimburse procedures in an investigative setting, they will be on firm ground when they deny support for those same procedures outside an investigative setting. This is both an ethical and a fiscally responsible position for the third parties to take. It will not be easy for the profession or for the payers to deal with these problems. Public education and patient education will be key elements of any solution. Shifting the blame from politician to payer to professional will only make the problems worse.

Cost Control↗

PubMed2005

Analysis of a pharmaceutical risk sharing agreement based on the purchaser's total budget.

Many public and private healthcare payers use formularies as a tool for controlling drug costs and quality. Although the price per dose is often negotiated as part of the formulary listing, payers may still face unlimited financial risk if demand is much greater than expected at the time of listing. The requirement for drug manufacturers to submit a budget impact analysis as part of the drug approval process suggests that payers are concerned not only with the cost effectiveness of a proposed drug but also with the potential increase in total expenditures that may result from new formulary listings. In this paper we define and analyze a model for financial risk sharing based on the total budget. Our analysis focuses on optimal decision making by manufacturers in the presence of a specific risk sharing agreement. We derive a manufacturer's optimal statement of budget impact and discuss several properties of the optimal solution.

Cost-Benefit Analysis↗