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PubMed1995

Toward a standard drug formulary for the treatment of headache.

The recent publication of drug formularies by third-party payers has serious implications for the practice of medicine. These formularies list the medications for which the consumer can be reimbursed by the third-party payer. The most restrictive of the five formularies I have received lists only two agents for the treatment of migraine headaches: Cafergot (at an incorrect dose of 1/100 mg) and Ergotrate which is no longer available. The most liberal of the formularies lists analgesics, Cafergot, Midrin, and Imitrex for the treatment of acute attacks, and as prophylactic agents, Inderal, Sansert, and analgesics (known to cause rebound headaches when used in this fashion in migraine patients). Abortive agents of proven value, such as DHE-45 and NSAIDs, and preventative medications, such as calcium channel blockers, tricyclic antidepressants, serotonin reuptake inhibitors, methylergonovine, and divalproex sodium, are not available. No one could quarrel with a goal of developing a cost-effective formulary. However, the authors of these formularies have clearly demonstrated their inability to provide even a current, accurate, and adequate formulary by existent standards of care in the treatment of migraine headache. While it is easy to criticize these formularies, it is more difficult to develop a comprehensive list that would satisfy the practitioners' need to provide relief for their patients with a minimum of side effects, and the needs of third-party payers (presumed) to provide quality care at the most economical level.

Formularies as Topic↗

PubMed2006

Cost-effectiveness of early intervention with once-daily budesonide in children with mild persistent asthma: results from the START study.

The inhaled Steroid Treatment As Regular Therapy in early asthma (START) study has shown that early intervention with inhaled budesonide in mild persistent asthma improves clinical outcomes in both adults and children. The aim of this study was to estimate the incremental cost-effectiveness of early treatment with budesonide Turbuhaler in children aged 5-10 yr who participated in START. Direct and indirect costs associated with asthma were determined for 1974 children participating in the double-blind, 3-year part of the study. Randomization was to placebo or to budesonide 200 microg once daily in each case in addition to usual asthma care. Cost-effectiveness ratios were calculated from the healthcare payer's and societal perspectives (using US prices). The addition of once-daily budesonide therapy to usual asthma care was associated with 16 additional symptom-free days (SFDs) per child over the 3-yr period (p < 0.001), with a substantial reduction (50%) in the mean number of days spent in hospital, and with reduced frequency of emergency room visits and missed school and caregiver work days. From the healthcare payer's perspective (direct costs), the increase in mean direct cost over 3 yr with budesonide was 169 dollars, which translated into an incremental cost of early intervention with budesonide in children of 10.50 dollars (95% CI 1.20-33.30 dollars) per SFD gained. From the societal perspective, there was a cost reduction over 3 yr of 192 dollars with budesonide relative to placebo. From a societal perspective, budesonide was therefore dominant. In conclusion, early intervention with once-daily budesonide added to usual asthma care in children with mild persistent asthma is cost-saving from a societal perspective and is acceptably cost-effective when viewed from a healthcare payer perspective.

Administration, Inhalation↗

PubMed2003

Understanding rural hospital bypass behavior.

CONTEXT: Though many rural hospitals offer a broad array of services, local residents may choose more distant facilities for inpatient care services. Depending on the extent of the bypass phenomenon, hospitals may experience financial distress, reduced service offerings, or closure. PURPOSE: This study provides a descriptive analysis of rural hospital bypass behavior in 7 states. METHODS: We examine hospital discharge data for calendar years 1991 and 1996 to determine the extent to which patients admitted from rural areas are bypassing local facilities. We also assess whether there are trends in bypass patterns over time. Our primary specification of bypass is defined as a discharge from a hospital between 15 and 1000 miles from the closest facility. FINDINGS: We found an overall bypass rate of 30%. This overall rate changed little between 1991 and 1996. Subgroups of patients, defined by payer and diagnosis, had differing propensities to bypass local rural facilities. Patients with managed care or commercial insurance had higher bypass rates compared to patients who relied on other payer sources. Medicare and uninsured (self-pay) patients had lower bypass rates. Payer type differences persisted when cases were divided into emergent and scheduled categories. Patients seeking general medical or obstetrical care had lower bypass rates than patients discharged with a diagnosis related group (DRG) related to complex medical, general surgery, or specialty surgery services. With the exception of normal delivery, DRG codes frequently associated with bypass discharges involved procedures or surgery that may not be offered by smaller rural facilities. CONCLUSIONS: Our results indicate that rural patients, or their admitting physicians, perceive local rural hospitals as a viable option for many inpatient care services but prefer other facilities for treatments beyond the scope of general medical or surgical treatment.

Catchment Area, Health↗

PubMed2005

How might the Medicare Prescription Drug, Improvement, and Modernization Act of 2003 affect the financial viability of rural pharmacies? An analysis of preimplementation prescription volume and payment sources in rural and urban areas.

CONTEXT: Passage of the Medicare Prescription Drug, Improvement, and Modernization Act of 2003 (MMA) has created interest in how the legislation will affect access to prescription drugs among rural beneficiaries. Policy attention has focused to a much lesser degree on the implications of the MMA for the financial viability of rural pharmacies. PURPOSE: This article presents descriptive information on mail-order prescriptions, volume, and payer type of retail prescriptions in rural vs urban areas. Together, these data provide a baseline for evaluating how implementation of the MMA may affect the financial viability of rural independent pharmacies. METHODS: Projections of prescriptions dispensed from retail and mail-order pharmacies in 2002 for the total US and a sample of 17 states were obtained from IMS Health. FINDINGS: The volume of mail-order prescriptions is small. Rural providers prescribed fewer retail and mail-order prescriptions per person, but more units per person. Rural areas have a higher percentage of prescriptions paid for by cash (18% vs 13%) and Medicaid (16% vs 10%) and a lower percentage of third-party payers than urban areas. Significant variation in volume and payer type exists between states. CONCLUSIONS: Rural, independent pharmacies may be negatively affected by MMA implementation as business shifts from cash to third-party reimbursement. The high degree of variation between states also has potentially important implications for the implementation of Prescription Drug Plan regions under MMA.

Community Pharmacy Services↗

PubMed2006

Economics on trial: the use and abuse of economic methods in third party tobacco litigation.

OBJECTIVE: To analyse how the tobacco industry responded to economic models and methods used in third party payer tobacco litigation that has occurred since 1994. METHODS: Identified 12 third party payer cases and reviewed the transcripts using WinMax qualitative software. Focused on defendant's opening and closing statements, followed by trial testimony, depositions, and plaintiff's transcripts. RESULTS: Tobacco industry defendants tried to create doubt and confusion about whether or not smoking caused disease and by extension led to health care costs; argued that the economic models used were not legitimate and were not appropriate for estimating the costs incurred by plaintiffs; and criticised the data sources used because they did not consist of the individuals whose health care costs were being sought. CONCLUSIONS: Faced with a new and unprecedented wave of anti-tobacco litigation from third party payers, the tobacco industry tried to adapt strategies that had been used successfully in the past-creation of unfounded doubt and confusion, and manipulation of the discovery process to force plaintiffs to withdraw or concede defeat. The strategies failed because credible economic models of the health care costs of smoking had been developed that were able to quantify the damages to a large group of health care recipients, because plaintiff's attorneys were able to commit significant resources and willing to undertake substantial financial risk to defend their new legal approaches, and because previous arguments related to individual responsibility were deemed irrelevant in third party litigation.

Cost of Illness↗

PubMed2000

Characteristics of managed behavioral health care organizations in 1996.

OBJECTIVE: Data from a survey of managed behavioral health care organizations were analyzed to describe characteristics of these firms as well as service utilization and revenues. METHODS: Six managed behavioral health care organizations fully completed a survey by the American Managed Behavioral Healthcare Association in which they reported 1996 data for their contracts. The contracts represented more than 16 million covered lives and accounted for approximately 13 percent of all individuals enrolled in managed behavioral health care organizations in 1996. RESULTS: More than three-quarters of the contracts (77.5 percent) were nonrisk. Plans described as network-based risk contracts, which represented 28.7 percent of covered members, accounted for 71.1 percent of revenues. The vast majority of reported contracts were with private employers or health maintenance organizations (HMOs); these contracts accounted for 76.8 percent of reported revenues. HMOs tended to place somewhat greater restrictions on outpatient psychotherapy and outpatient medication management visits than did other types of payers; the most common limit for HMO-related contracts was 20 outpatient visits a year, compared with 50 visits a year for other payer categories. HMO contracts also required higher copayments for outpatient visits. Utilization of services differed by payer type; for example, use of inpatient services ranged from.18 percent of covered members for contracts with private employers to.90 percent of covered members for Medicaid contracts. CONCLUSIONS: Overall rates of service utilization were lower than those reported in other recent studies of managed behavioral health care. The survey findings provide a starting point to guide further investigation in this area.

Behavior Therapy↗

PubMed1989

Current procedural terminology codes for psychiatric services.

Physicians' Current Procedural Terminology (CPT) is the system most commonly recognized by third-party payers for describing medical services in numerical codes for subsequent reimbursement. Adequate description of psychiatric services using CPT codes is an ongoing challenge. Psychiatrists have responded to the demands of third-party payers and peer review organizations for documentation and accountability by billing for specific services rather than by designating all care as psychotherapy. The authors present guidelines for using CPT codes to describe inpatient and outpatient psychiatric services and consultation. They also discuss continuing controversies, including regional diversity in the interpretation of codes by third-party payers, the risks of "gaming" the coding process, and the use of CPT codes by non-physician providers and the consequent mixing of data on service charges.

Abstracting and Indexing↗

PubMedDate not supplied

Patient preferences for thrombolytic therapy in acute myocardial infarction.

BACKGROUND: Despite extensive professional debate regarding the optimal thrombolytic therapy strategy in acute myocardial infarction (AMI), patient preferences have not been explored. METHODS: Preferences among patients with known or suspected coronary artery disease for treatment with tissue plasminogen activator (tPA) or streptokinase (SK) for AMI were determined using a questionnaire presenting GUSTO-1 trial and drug cost data. Preferences were based on consideration of 30-day mortality (M) alone, hemorrhagic stroke rate (SR) alone, overall preference (M + SR), drug acquisition costs, and the estimated annual costs of using a single agent to treat all AMIs. Cost-related responses were provided under payer designations of self, third-party insurance, and federal government. RESULTS: The response rate was 81% (101/125 patients). tPA was preferred by 84%, and SK by 66%, for M alone and SR alone, respectively (chi 2, p < 0.01). Overall preference (M + SR) favored tPA (78%, p < 0.01). tPA preference decreased to 43% considering drug acquisition costs under the self-pay option (p < 0.01 vs M + SR). Similar trends of lesser magnitude were also observed for the third-party and government-payer options. CONCLUSIONS: Under conditions of zero cost and consideration of mortality plus stroke-risk data, tPA were preferred overall due to its lower mortality. Introduction of drug-cost data significantly shifted the preference toward SK, particularly under the self-payer designation. Patient preferences for thrombolytic therapy in AMI indicate tradeoffs between clinical attributes and costs, and should assist in framing medical debate and decision making.

Acute Disease↗

PubMedDate not supplied

Prospective payment and the Medicare hospice benefit.

The objective of this study was to determine the effects of very high cost patients on hospice financial status. Ten Pennsylvania hospices dually certified by Medicare were randomly selected and agreed to participate. Patient age, sex, diagnosis, length of stay and payer were fairly uniform across hospices. Payments varied by diagnosis and payer. High cost patients were irregularly found in hospices; low cost patients were commonly and regularly distributed. Every hospice had at least one high cost patient. In one, the uncompensated payment for the 6.6 percent of patients defined as high cost ($7,300 and above) would have been 14.7 percent of total annual revenues. In another, uncompensated payments for high cost patients (9.8 percent) would have accounted for 17.2 percent of revenue. In 96.3 percent of the instances patients utilized less than the Medicare Hospice Benefit maximum allowable cost ($7,300); and, 98.8 percent of the time patients stayed less than the maximum allowable length of time of 210 days. A logistic regression model found long length of stay (p < 0.0001), Medicare hospice benefit as primary payer (p < 0.0001), any hospitalization during hospice stay (p < 0.003) and cerebrovascular disease diagnosis (p < 0.02) to be significantly related to high cost. Between the time the study was planned and completed, Medicare instituted a reinsurance program allowing unused funds below the maximum allowable limit from one patient to be used for patients who exhausted their benefits. Thus, no study hospice was adversely affected by high cost patients. However, it should serve as an object lesson to Medicare in using prospective payment.(ABSTRACT TRUNCATED AT 250 WORDS)

Aged↗

PubMed1999

Outpatient-based bone marrow transplantation for hematologic malignancies: cost saving or cost shifting?

PURPOSE: To determine whether a shift in care from an inpatient-based to an outpatient-based bone marrow transplantation (BMT) program decreased charges to payers without increasing clinical complications or out-of-pocket costs to patients. PATIENTS AND METHODS: This nonrandomized prospective cohort study compared clinical and economic outcomes for 132 consecutive BMT patients with hematologic malignancies who received either inpatient- or outpatient-based BMT care. RESULTS: Seventeen of 132 BMT patients underwent outpatient-based BMT. Compared with the inpatient-based group, the outpatient-based group had a markedly lower mean number of inpatient hospital days (22 v 47; P <.001) and decreased mean inpatient facility charges ($61,059 less per patient; P <.0001) but had higher mean outpatient facility charges ($49,732 higher; P <. 0001). Total professional fees were similar for the groups. The mean total charge to payers was only 7% less ($12,652; P =.21) for outpatient-based BMT than for inpatient-based BMT, but total charge was 34% less for outpatient compared with inpatient BMT ($54,240; P = 0.056) in a subset of patients who had a standard rather than high risk of treatment failure. There was no significant difference between groups in out-of-pocket costs for transportation, lodging, meals, home nursing, household assistance, child care, medication expenses, or unreimbursed medical bills. There also was no significant difference between groups in reported income lost, involuntary unemployment, or months of disability. The two groups had similar rates of major complications, including death, significant acute graft-versus-host disease, and veno-occlusive disease of the liver. CONCLUSION: Increased use of outpatient-based BMT should produce substantial cost savings for payers without adverse effects on patients for those patients who do not have a high risk of treatment failure.

Adult↗

PubMed2004

Is physician anesthesia cost-effective?

UNLABELLED: One of the most controversial issues in anesthesia is whether nonmedically directed nurse anesthetists are relatively more cost-effective than anesthesiologists in the provision of anesthesia care. We electronically surveyed anesthesia practices throughout the United States to estimate the range in anesthesia professional costs from the payer perspective. Using this survey data on anesthesia reimbursement and published outcomes studies, we developed an ad hoc model to estimate the cost-effectiveness of physician-directed anesthesia relative to a nonmedically directed nurse anesthetist model of care from the payer perspective. Cost-effectiveness ratios were defined as the ratio of incremental costs associated with physician anesthesia relative to the estimated incremental life expectancy gains with this model of care (i.e., dollars per year of life saved [US dollars /YLS]). Reference case results suggest that physician anesthesia is cost saving with an estimated incremental cost-effectiveness ratio of -US dollars 2601/YLS for a younger privately insured patient and an estimated cost-effectiveness ratio of -US dollars 4410/YLS for an elderly Medicare insured patient. Cost-effectiveness ratios ranged from -US dollars 4410 to US dollars 38778/YLS in univariate and multivariate sensitivity analyses across payer types. Results were most sensitive to assumed differences in reimbursement (commercial conversion factors) and to mortality rate assumptions by provider type. This analysis offers economic evidence in support of the physician anesthesia model of care. IMPLICATIONS: Recent outcome studies suggest improved patient outcomes when physicians medically direct nurse anesthetists versus anesthesia care delivered with nonmedically directed nurses. The relative cost-effectiveness of this practice model is, however, unknown. This economic analysis suggests that outcome gains with physician anesthesia may be obtained at cost savings or, under conservative assumptions, at a cost deemed reasonable by society.

Age Factors↗

PubMed1990

Estimating the extent of Medicaid spend-down in nursing homes.

Although it is commonly thought that a very high proportion of private-pay nursing home patients become eligible for Medicaid during their stay, few national studies have been conducted to determine the extent of Medicaid "spend-down." The discharged resident survey of the 1985 National Nursing Home Survey was analyzed to determine the extent of spend-down among elderly nursing home patients during a single nursing home episode, the proportion of patients who remained Medicaid or private payers throughout their stay, and how the measures varied by patient characteristics. Overall, during a single nursing home episode only 10 percent of nursing home patients who entered as private payers received Medicaid at discharge. Roughly one-third of nursing home patients remained on Medicaid throughout their stay, and another third remained private payers throughout their stay.

Aged↗

PubMed1993

The American states and Canada: a comparative analysis of health care spending.

Most comparisons of the relative effectiveness of cost containment in the Canadian and U.S. health systems trace Canada's greater success to its single-payer approach. However, these studies ignore the substantial variation that exists in hospital and personal health care spending among both the American states and the provinces and territories of Canada. Four American states have adopted all-payer hospital rate setting; one other uses competitive bidding. All five show rates of growth in per capita hospital spending comparable to (and in some cases, lower than) the Canadian jurisdictions. Hospital spending, as a percentage of state gross domestic product (GDP), declined or remained constant in four of the five states. In four out of the five, growth in per capita spending on personal care, as a percentage of GDP, remained or fell below the national average. By contrast, in Canada, per capita spending on both hospitals and personal health care increased as a percentage of GDP in ten out of eleven jurisdictions. In each of the U.S. states, government played a central role in structuring the terms of payment and thus strengthened the hand of purchasers over providers. This strategy, rather than specifically a single-payer or universal health insurance approach, seems to be the key to limiting the growth in health costs to the growth in state or national income.

Canada↗

PubMed2003

Break-even analysis revisited: the need to adjust for profitability, the collection rate and autonomous income.

This paper modifies traditional break-even analysis and develops a model that reflects the influence of variation in payer mix, the collection rate, profitability and autonomous income on the desired volume alternative. The augmented model indicates that a failure to adjust for uncollectibles and the net surplus results in a systematic understatement of the desired volume alternative. Conversely, a failure to adjust for autonomous income derived from the operation of cafeterias, gift shops or an organization's investment in marketable securities produces an overstatement of the desired volume. In addition, this paper uses Microsoft Excel to develop a spreadsheet that constructs a pro forma income statement, expressed in terms of the contribution margin. The spreadsheet also relies on the percentage of sales or revenue approach to prepare a balance sheet from which indicators of fiscal performance are calculated. Hence, the analysis enables the organization to perform a sensitivity analysis of potential changes in the desired volume, the operating margin, the current ratio, the debt: equity ratio and the amount of cash derived from operations that are associated with expected variation in payer mix, the collection rate, grouped by payer, the net surplus and autonomous income.

Accounts Payable and Receivable↗

PubMed1997

What care should be covered?

The answer to the question of what health care services should be covered by a managed care plan is straightforward; the plan should cover whatever the consumer is willing to pay for. From the plan's perspective, the consumer is the payer, that is, the employer who negotiates the plan; not the individual patient whose personal preferences and interests may be quite different. Since managed care organizations contract with payers to arrange for health care services within a defined set of benefits, there is a broader question as well: Within the benefits chosen by the payer, what actually is covered? Criteria for determining "medical necessity," which managed care plans frequently use as the basis for coverage, are discussed.

Contracts↗

PubMed1995

Risk contracts in managed mental health care.

Private employers and state Medicaid programs are increasingly writing risk contracts with managed behavioral health care companies to manage mental health and substance abuse benefits. This paper analyzes the case for a carve-out program and makes recommendations about the form of the payer-managed behavioral health care contract. Payers should consider using a "soft" capitation contract in which only some of the claims' risk is transferred to the managed behavioral health care company. To avoid incentives to underserve seriously ill persons, we recommend that payers not allow choice by enrollees among risk contractors.

Capitation Fee↗

PubMedDate not supplied

Medicare's coverage of colorectal cancer drugs: a case study in evidence development and policy.

Payers point to the lack of unbiased evidence for making coverage decisions for new and often costly technologies. This paper provides a case study of a new approach to developing information to meet the needs of a payer: Medicare's coverage with evidence development (CED) policy. Medicare's decision to condition coverage of cancer therapies on clinical trial participation is an early application of CED and signals Medicare's interest in developing evidence on new technologies for beneficiaries. This paper reviews the rationale and challenges Medicare faces in applying its CED policy and discusses the implications of payers' using and generating evidence.

Antineoplastic Agents↗

PubMed1997

Preoperative spirometry and laparotomy: blowing away dollars.

STUDY OBJECTIVE: Increasing evidence indicates that routine preoperative diagnostic spirometry (pulmonary function tests [PFTs]) before elective abdominal surgery does not predict individual risk of postoperative pulmonary complications and is overutilized. This economic evaluation estimates potential savings from reduced use of preoperative PFTs. DESIGN: Analyses of (1) real costs (resource consumption to perform tests) and (2) reimbursements (expenditures for charges) by third-party payers. SETTING: University-affiliated public and Veterans Affairs hospitals. PATIENTS: Adults undergoing elective abdominal operations. MEASUREMENTS AND RESULTS: Average real cost of PFTs was $19.07 (95% confidence interval [CI], $18.53 to $19.61), based on a time and motion study. Average reimbursement expenditure by third-party payers for PFTs was $85 (range, $33 to $150; 95% CI, $68 to $103), based on Medicare payment of $52 and a survey of nine urban US hospitals with a spectrum of bed sizes and teaching status. Estimates from published literature included the following: (1) annual number of major abdominal operations, 3.5 million; and (2) proportion of PFTs not meeting current guidelines, 39% (95% CI, 0.31 to 0.47). Local data were used when estimates were not available in the literature: (1) proportion of laparotomies that are elective, 76% (95% CI, 0.73 to 0.79); and (2) frequency of PFTs before laparotomy, 69% (95% CI, 0.54 to 0.84). Estimated annual national real costs for preoperative PFTs are $25 million to $45 million. If use of PFTs were reduced by our estimate for the proportion of PFTs not meeting current guidelines, potential annual national cost savings would be $7,925,411 to $21,406,707. National reimbursement expenditures by third-party payers range from more than $90 million to more than $235 million. If use were reduced, potential annual savings in reimbursements would be $29,084,076 to $111,345,440. Potential savings to Medicare approach $8 million to $20 million annually. CONCLUSION: Reduced use of PFTs before elective abdominal surgery could generate substantial savings. Current evidence indicates reduced use would not compromise patients' outcomes.

Abdomen↗