Sick and twisted
Is This Time Different? The Slowdown in Healthcare Spending
Amitabh Chandra, Jonathan Holmes & Jonathan Skinner
NBER Working Paper, December 2013
Abstract:
Why have health care costs moderated in the last decade? Some have suggested the Great Recession alone was the cause, but health expenditure growth in the depths of the recession was nearly identical to growth prior to the recession. Nor can the Affordable Care Act (ACA) can take credit, since the slowdown began prior to its implementation. Instead, we identify three primary causes of the slowdown: the rise in high-deductible insurance plans, state-level efforts to control Medicaid costs, and a general slowdown in the diffusion of new technology, particularly in the Medicare population. A more difficult question is: Will this slowdown continue? Here we are more pessimistic, and not entirely because a similar (and temporary) slowdown occurred in the early 1990s. The primary determinant of long-term growth is the continued development of expensive technology, and there is little evidence of a permanent slowdown in the technology pipeline. Proton beam accelerators are on target to double between 2010 and 2014, while the market for heart-assist devices (costing more than $300,000) is projected to grow rapidly. Accountable care organizations (ACOs) and emboldened insurance companies may yet stifle health care cost growth, but our best estimate over the next two decades is that health care costs will grow at GDP plus 1.2 percent; lower than previous estimates but still on track to cause serious fiscal pain for taxpayers and workers who bear the costs of higher premiums.
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Health and Financial Fragility: Evidence from Car Crashes and Consumer Bankruptcy
Edward Morrison et al.
University of Chicago Working Paper, October 2013
Abstract:
This paper assesses the importance of adverse health shocks as triggers of bankruptcy filings. We view car crashes as a proxy for health shocks and draw on a large sample of police crash reports linked to hospital admission records and bankruptcy case files. We report two findings: (i) there is a strong positive correlation between an individual's pre-shock financial condition and his or her likelihood of suffering a health shock, an example of behavioral consistency; and (ii) after accounting for this simultaneity, we are unable to identify a causal effect of health shocks on bankruptcy filing rates. These findings emphasize the importance of risk heterogeneity in determining financial fragility, raise questions about prior studies of "medical bankruptcy," and point to important challenges in identifying the triggers of consumer bankruptcy.
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Can Consumers Make Affordable Care Affordable? The Value of Choice Architecture
Eric Johnson et al.
PLoS ONE, December 2013
Abstract:
Tens of millions of people are currently choosing health coverage on a state or federal health insurance exchange as part of the Patient Protection and Affordable Care Act. We examine how well people make these choices, how well they think they do, and what can be done to improve these choices. We conducted 6 experiments asking people to choose the most cost-effective policy using websites modeled on current exchanges. Our results suggest there is significant room for improvement. Without interventions, respondents perform at near chance levels and show a significant bias, overweighting out-of-pocket expenses and deductibles. Financial incentives do not improve performance, and decision-makers do not realize that they are performing poorly. However, performance can be improved quite markedly by providing calculation aids, and by choosing a "smart" default. Implementing these psychologically based principles could save purchasers of policies and taxpayers approximately 10 billion dollars every year.
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Wedges, Wages, and Productivity under the Affordable Care Act
Casey Mulligan & Trevor Gallen
NBER Working Paper, December 2013
Abstract:
Our paper documents the large labor market wedges created by taxes, subsidies, and regulations included in the Affordable Care Act. The law changes terms of trade in both goods and factor markets for firms offering health insurance coverage. We use a multi-sector (intra-national) trade model to predict and quantify consequences of the Affordable Care Act for the patterns of output, labor usage, and employee compensation. We find that the law will significantly redistribute from high-wage workers to low-wage workers and to non-workers, reduce total factor productivity about one percent, reduce per-capita labor hours about three percent (especially among low-skill workers), reduce output per capita about two percent, and reduce employment less for sectors that ultimately pay employer penalties.
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Wedges, Labor Market Behavior, and Health Insurance Coverage under the Affordable Care Act
Trevor Gallen & Casey Mulligan
NBER Working Paper, December 2013
Abstract:
The Affordable Care Act's taxes, subsidies, and regulations significantly alter terms of trade in both goods and factor markets. We use a multi-sector (intra-national) trade model to predict and quantify consequences of the Affordable Care Act for the incidence of health insurance coverage and patterns of labor usage. If and when the new exchange plans are competitive with employer-sponsored insurance (ESI), our model suggests that more than 20 million people will leave ESI as a consequence of the law. Behavioral changes that are captured in the model could add about 3 million participants to the new exchange plans: beyond those that would participate solely as the result of employer decisions to stop offering coverage and beyond those who would have been uninsured. Industries and regions will grow, decline, and change coverage on the basis of their relative demand for skilled labor.
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"Simply un-American": Nativism and Support for Health Care Reform
Benjamin Knoll & Jordan Shewmaker
Political Behavior, forthcoming
Abstract:
This study investigates the relationship between individual-level support for the 2010 Affordable Care Act and nativism, the perception that a traditional American culture and way of life needs to be protected against foreign influence. The results of an analysis of a 2011 public opinion survey demonstrate that nativism was an independent and significant predictor of opposition to health care reform and that this effect held for both Republicans as well as Democrats, although the relationship is stronger for Republicans. This is substantively important for two reasons. First, it demonstrates that certain sub-groups of the American public evaluate public policy proposals on the basis of their perceived "foreignness." Second, it demonstrates that while nativism is traditionally associated with immigration and other race/ethnic-based policy preferences, it also affects attitudes toward other seemingly race-neutral policies in the United States.
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Moving For Medicaid? Recent Eligibility Expansions Did Not Induce Migration From Other States
Aaron Schwartz & Benjamin Sommers
Health Affairs, January 2014, Pages 88-94
Abstract:
Starting in 2014, many low-income adult residents of states that forgo the Affordable Care Act's expansion of Medicaid would be eligible for that program if they moved to a state that had chosen to expand its coverage. Some of these people may migrate to receive coverage, thereby increasing costs for states that have expanded the program. This is known as the "welfare magnet" hypothesis, a claim that geographic variation in social programs induces the migration of welfare recipients to places with more generous benefits or eligibility. To investigate whether such spillover effects are likely, we used data from the Current Population Survey to examine the migration patterns of low-income people before and after recent expansions of public insurance in Arizona, Maine, Massachusetts, and New York. Using difference-in-differences analysis of migration in expansion and control states, we found no evidence of significant migration effects. Our preferred estimate was precise enough to rule out net migration effects of larger than 1,600 people per year in an expansion state. These results suggest that migration will not be a common way for people to obtain Medicaid coverage under the current expansion and that interstate migration is not likely to be a significant source of costs for states choosing to expand their programs.
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Who Really Pays for Medicaid: Intended and Unintended Consequences of the Matching Grant
Kathleen Adams, Patricia Ketsche & Karen Minyard
Public Finance Review, forthcoming
Abstract:
The goal of the Medicaid intergovernmental matching grant is to stimulate state spending while achieving some level of beneficiary and taxpayer equity. This study uses the Current Population Survey data on 174,031 families to estimate federal and state Medicaid tax burdens per family, net of tax exporting. Of the total US$305 billion spent on Medicaid in 2004, US$29.9 billion is redistributed through the grant's Federal Medical Assistance Percentage, as residents of low-income states export federal tax burdens to higher-income states. Another US$4.5 billion in state taxes is exported via business flows and tourism with the bulk, US$3.2 billion, being exported internationally. Some states pay as little as US$.55 in "own" tax revenues while residents in states importing the burden pay up to US$1.86, for every US$1 spent on Medicaid. Since virtually all states have regressive tax structures, it is federal Medicaid funding that helps maintain vertical equity overall.
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First, Do No Harm: Financial Conflicts in Medicine
Joseph Engelberg, Christopher Parsons & Nathan Tefft
University of California Working Paper, August 2013
Abstract:
We explore financial conflicts of interest faced by doctors. Pharmaceutical firms frequently pay physicians in the form of meals, travel, and speaking fees. Over half of the 334,000 physicians in our sample receive payment of some kind. When a doctor is paid, we find that he is more likely to prescribe a drug of the paying firm, both relative to close substitutes and even generic versions of the same drug. This payment-for-prescription effect scales with transfer size, although doctors receiving only small and/or infrequent payments are also affected. The pattern holds in nearly every U.S. state, but it is strongly and positively related to regional measures of corruption.
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Externalities and Taxation of Supplemental Insurance: A Study of Medicare and Medigap
Marika Cabral & Neale Mahoney
NBER Working Paper, January 2014
Abstract:
Most health insurance policies use cost-sharing to reduce excess utilization. The purchase of supplemental insurance can blunt the impact of this cost-sharing, potentially increasing utilization and exerting a negative externality on the primary insurance provider. This paper estimates the effect of private Medigap supplemental insurance on public Medicare spending using Medigap premium discontinuities in local medical markets that span state boundaries. Using administrative data on the universe of Medicare beneficiaries, we estimate that Medigap increases an individual's Medicare spending by 22.2%. We find that the take-up of Medigap is price sensitive with an estimated demand elasticity of -1.8. Using these estimates, we calculate that a 15% tax on Medigap premiums would generate combined tax revenue and cost savings of $12.9 billion annually. A Pigouvian tax would generate combined annual savings of $31.6 billion.
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The Effects of Health Information Technology on the Costs and Quality of Medical Care
Leila Agha
Journal of Health Economics, forthcoming
Abstract:
Information technology has been linked to productivity growth in a wide variety of sectors, and health information technology (HIT) is a leading example of an innovation with the potential to transform industry-wide productivity. This paper analyzes the impact of health information technology (HIT) on the quality and intensity of medical care. Using Medicare claims data from 1998-2005, I estimate the effects of early investment in HIT by exploiting variation in hospitals' adoption statuses over time, analyzing 2.5 million inpatient admissions across 3900 hospitals. HIT is associated with a 1.3 percent increase in billed charges (p-value: 5.6%), and there is no evidence of cost savings even five years after adoption. Additionally, HIT adoption appears to have little impact on the quality of care, measured by patient mortality, adverse drug events, and readmission rates.
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The Effect of U.S. Health Insurance Expansions on Medical Innovation
Jeffrey Clemens
NBER Working Paper, December 2013
Abstract:
I study the channels through which health insurance influences medical innovation. Following Medicare and Medicaid's passage, I find that U.S.-based medical-equipment patenting rose by 40 to 50 percent relative to both other U.S. patenting and foreign medical-equipment patenting. Within the United States, increases in medical-equipment patenting were most dramatic in states where the Great Society insurance expansions were largest and in which there were large baseline numbers of physicians per resident. Consistent with historical case studies, Medical innovation's determinants extend beyond the potential revenues associated with global market size; a physician driven process of innovation-while-doing appears to play a central role. An extrapolation of the evidence suggests that the last half century's U.S. insurance expansions have driven 25 percent of recent global medical-equipment innovation. In a standard decomposition of health spending growth, this insurance-induced innovation accounts for 15 percent of the long run rise in U.S. health spending in hospitals, physicians' offices, and other clinical settings.
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Jillian Berry Jaeker, Anita Tucker & Michael Lee
Harvard Working Paper, October 2013
Abstract:
We exploit an exogenous process change at two emergency departments (EDs) within a health system to test the theory that increasing capacity in a discretionary work setting increases wait times due to additional services being provided to customers as a consequence of reduced marginal costs for a task. We find that an increase in physicians' capacity for ordering ultrasounds (U/S) resulted in an 11.5 percentage point increase in the probability of an U/S being ordered, confirming that resource availability induces demand. Furthermore, we find that the additional U/S demand increased the time to return other radiological tests due to the higher demand placed on radiologists from the additional U/S. Consequently, the average length of stay (LOS) for patients with an abdominal complaint increased by nearly 30 minutes, and the waiting time to enter the ED increased by 26 minutes. We do not find any indications of improved performance on clinical metrics, with no statistical change in the number of admissions to the hospital or readmissions to the ED within 72 hours. Our study highlights an important lesson for process improvement in interdependent service settings: increasing process capacity at one step in the process can increase demand at that step, as well as for a subsequent shared service, and both can result in an overall negative impact on performance.
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Employer Contribution and Premium Growth in Health Insurance
Yiyan Liu & Ginger Zhe Jin
NBER Working Paper, December 2013
Abstract:
We study whether employer premium contribution schemes could impact the pricing behavior of health plans and contribute to rising premiums. Using 1991-2011 data before and after a 1999 premium subsidy policy change in the Federal Employees Health Benefits Program (FEHBP), we find that the employer premium contribution scheme has a differential impact on health plan pricing based on two market incentives: 1) consumers are less price sensitive when they only need to pay part of the premium increase, and 2) each health plan has an incentive to increase the employer's premium contribution to that plan. Both incentives are found to contribute to premium growth. Counterfactual simulation shows that average premium would have been 10% less than observed and the federal government would have saved 15% per year on its premium contribution had the subsidy policy change not occurred in the FEHBP.
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Competition and the Impact of Online Hospital Report Cards
Shin-Yi Chou et al.
Journal of Health Economics, forthcoming
Abstract:
Information on the quality of healthcare gives providers an incentive to improve care, and this incentive should be stronger in more competitive markets. We examine this hypothesis by studying Pennsylvanian hospitals during the years 1995-2004 to see whether those hospitals located in more competitive markets increased the quality of the care provided to Medicare patients after report cards rating the quality of their Coronary Artery Bypass Graft programs went online in 1998. We find that after the report cards went online, hospitals in more competitive markets used more resources per patient, and achieved lower mortality among more severely-ill patients.
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Allen Kachalia et al.
Health Affairs, January 2014, Pages 59-66
Abstract:
"Safe harbor" legislation that provides liability protection to physicians when they follow designated guidelines is often proposed as a way to reform the malpractice system while improving patient safety. However, published evidence provides little policy guidance on implementing safe harbors. With the support of an Agency for Healthcare Research and Quality planning grant, we conducted an empirical analysis of closed liability claims in Oregon to determine the potential effects of hypothetical safe harbor legislation. We found that such legislation would have changed the liability outcome in favor of the physician defendant in only 1 percent of 266 claims from the period 2002-09 that we reviewed. Nevertheless, if safe harbors can induce greater physician adherence to care guidelines, they have the potential to improve patient safety. Implementing safe harbor legislation, however, requires overcoming a number of hurdles, including selecting and updating approved guidelines, obtaining broad stakeholder support, and withstanding challenges to the legal validity of the legislation. More experimentation with safe harbors is needed to determine their effects on the performance of the liability system and on health care quality and costs.
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Medicaid Increases Emergency-Department Use: Evidence from Oregon's Health Insurance Experiment
Sarah Taubman et al.
Science, forthcoming
Abstract:
In 2008, Oregon initiated a limited expansion of a Medicaid program for uninsured, low-income adults, drawing names from a waiting list by lottery. This lottery created a rare opportunity to study the effects of Medicaid coverage using a randomized controlled design. Using the randomization provided by the lottery and emergency-department records from Portland-area hospitals, we study the emergency-department use of about 25,000 lottery participants over approximately 18 months after the lottery. We find that Medicaid coverage significantly increases overall emergency use by 0.41 visits per person, or 40 percent relative to an average of 1.02 visits per person in the control group. We find increases in emergency-department visits across a broad range of types of visits, conditions, and subgroups, including increases in visits for conditions that may be most readily treatable in primary care settings.
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Andrew Dalton et al.
PLoS ONE, January 2014
Background: The Patient Protection and Affordable Care Act (ACA) galvanised debate in the United States (US) over universal health coverage. Comparison with countries providing universal coverage may illustrate whether the ACA can improve health outcomes and reduce disparities. We aimed to compare quality and disparities in hypertension management by socio-economic position in the US and England, the latter of which has universal health care.
Method: We used data from the Health and Retirement Survey in the US, and the English Longitudinal Study for Aging from England, including non-Hispanic White respondents aged 50-64 years (US market-based v NHS) and >65 years (US-Medicare v NHS) with diagnosed hypertension. We compared blood pressure control to clinical guideline (140/90 mmHg) and audit (150/90 mmHg) targets; mean systolic and diastolic blood pressure and antihypertensive prescribing, and disparities in each by educational attainment, income and wealth, using regression models.
Results: There were no significant differences in aggregate achievement of clinical targets aged 50 to 65 years (US market-based vs. NHS- 62.3% vs. 61.3% [p = 0.835]). There was, however, greater control in the US in patients aged 65 years and over (US Medicare vs. NHS- 53.5% vs. 58.2% [p = 0.043]). England had no significant socioeconomic disparity in blood pressure control (60.9% vs. 63.5% [p = 0.588], high and low wealth aged ?65 years). The US had socioeconomic differences in the 50-64 years group (71.7% vs. 55.2% [p = 0.003], high and low wealth); these were attenuated but not abolished in Medicare beneficiaries.
Conclusion: Moves towards universal health coverage in the US may reduce disparities in hypertension management. The current situation, providing universal coverage for residents aged 65 years and over, may not be sufficient for equality in care.
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Hospital Readmissions Reduction Program: An Economic and Operational Analysis
Dennis Zhang et al.
Northwestern University Working Paper, December 2013
Abstract:
The Hospital Readmission Reduction Program (HRRP), a part of the US Patient Protection and Affordable Care Act, requires the Centers for Medicare and Medicaid Services to penalize payments to hospitals with excess readmissions. We take an economic and operational (patient flow) perspective to ask a simple question: assuming that hospitals are self-interested operating-margin maximizers and are strategically forward-looking, does the structure of the HRRP policy provide economic incentives to all hospitals to reduce readmissions? If not, which hospitals are left behind, and what are the challenges? Since hospitals are bench-marked against their peers under the policy, we use a game-theoretical model to describe hospitals' behavior. While the game is complex, we develop bounds on equilibria that provide insights into the effectiveness of the HRRP policy. We calibrate our model with a dataset of hospitals in California. Our model suggests that in the long term, a significant proportion of hospitals will prefer to pay penalties rather than reduce readmissions. For a broad range of parameters, we find that the policy may be ineffective in inducing some hospitals to reduce readmissions: these are hospitals that either (i) are located in sparsely served areas, (ii) have a low fraction of revenue coming from Medicare, (iii) have currently high readmission rates, or (iv) have a high contribution margin per patient. We also examine the effect of certain changes to the HRRP policy.
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Survey Finds Few Orthopedic Surgeons Know The Costs Of The Devices They Implant
Kanu Okike et al.
Health Affairs, January 2014, Pages 103-109
Abstract:
Orthopedic procedures represent a large expense to the Medicare program, and costs of implantable medical devices account for a large proportion of those procedures' costs. Physicians have been encouraged to consider cost in the selection of devices, but several factors make acquiring cost information difficult. To assess physicians' levels of knowledge about costs, we asked orthopedic attending physicians and residents at seven academic medical centers to estimate the costs of thirteen commonly used orthopedic devices between December 2012 and March 2013. The actual cost of each device was determined at each institution; estimates within 20 percent of the actual cost were considered correct. Among the 503 physicians who completed our survey, attending physicians correctly estimated the cost of the device 21 percent of the time, and residents did so 17 percent of the time. Thirty-six percent of physicians and 75 percent of residents rated their knowledge of device costs "below average" or "poor." However, more than 80 percent of all respondents indicated that cost should be "moderately," "very," or "extremely" important in the device selection process. Surgeons need increased access to information on the relative prices of devices and should be incentivized to participate in cost containment efforts.
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Coady Wing & Allison Marier
Journal of Health Economics, forthcoming
Abstract:
In the United States, occupational regulations influence the work tasks that may legally be performed by dentists and dental hygienists. Only a dentist may legally perform most dental procedures; however, a smaller list of basic procedures may be provided by either a dentist or a dental hygienist. Since dentists and hygienists possess different levels of training and skill and receive very different wages, it is plausible that these regulations could distort the optimal allocation of skills to work tasks. We present simple theoretical framework that shows different ways that such regulations might affect the way that dentists and dental hygienists are used in the production of dental services. We then use a large database of dental insurance claims to study the effects of the regulations on the prevailing prices of a set of basic dental services. Our empirical analysis exploits variation across states and over time in the list of services that may be provided by either type of worker. Our main results suggest that the task-specific occupational regulations increase prices by about 12%. We also examine the effects of related occupational regulations on the utilization of basic dental services. We find that allowing insurers to directly reimburse hygienists for their work increases one year utilization rates by 3 to 4 percentage points.
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Expanding Federal Funding to Community Health Centers Slows Decline in Access for Low-Income Adults
Stacey McMorrow & Stephen Zuckerman
Health Services Research, forthcoming
Objective: To identify the impact of the Health Center Growth Initiative on access to care for low-income adults.
Data Sources: Data on federal funding for health centers are from the Bureau of Primary Health Care's Uniform Data System (2000-2007), and individual-level measures of access and use are derived from the National Health Interview Survey (2001-2008).
Study Design: We estimate person-level models of access and use as a function of individual- and market-level characteristics. By using market-level fixed effects, we identify the effects of health center funding on access using changes within markets over time. We explore effects on low-income adults and further examine how those effects vary by insurance coverage.
Data Collection: We calculate health center funding per poor person in a health care market and attach this information to individual observations on the National Health Interview Survey. Health care markets are defined as hospital referral regions.
Principal Findings: Low-income adults in markets with larger funding increases were more likely to have an office visit and to have a general doctor visit. These results were stronger for uninsured and publicly insured adults.
Conclusions: Expansions in federal health center funding had some mitigating effects on the access declines that were generally experienced by low-income adults over this time period.
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Impact of a High-deductible Health Plan on Outpatient Visits and Associated Diagnostic Tests
Sheila Reddy et al.
Medical Care, January 2014, Pages 86-92
Background: By shifting a greater share of out-of-pocket medical costs to consumers, high-deductible health plans (HDHP) might discourage use of essential outpatient services.
Objective: The objective of the study was to examine the impact of an HDHP on outpatient visits and associated laboratory and radiology tests.
Research Design/Subjects: We used a pre-post with comparison group study design to examine the differential change in outpatient service utilization among 7953 adults who were switched from a traditional Health Maintenance Organization plan to an HDHP compared with 7953 adults remaining in traditional plans. HDHP members had full coverage of preventive laboratory tests and modest copayments for outpatient visits, similar to controls, but faced full cost sharing under the deductible for radiology tests and laboratory tests not classified as preventive.
Results: Compared with controls, the HDHP group experienced moderate relative decreases in overall office visits (incidence rate ratios=0.91, or a 9% relative reduction; 95% confidence interval: 0.88, 0.94) and visits for higher-priority (0.91; 0.85, 0.97) and lower-priority (0.89; 0.81, 0.99) chronic conditions. There were no significant differences in changes in visit rates for acute higher-priority or lower-priority conditions (both 0.93; 0.86, 1.01) or preventive laboratory tests (0.97; 0.93, 1.02). HDHP members showed moderate relative reductions in the use of general laboratory tests (0.91; 0.86, 0.97) but not radiology tests (0.97; 0.91, 1.03).
Conclusions: Chronic outpatient visits declined among HDHP members, although preventive laboratory tests and acute visits remained unchanged. HDHP patients with chronic illnesses who have more contact with the health care system might be more likely to reduce utilization because of increased exposure to costs associated with ambulatory visits.
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Carrie Colla et al.
Healthcare, December 2013, Pages 100-107
Background: Although accountable care organizations (ACOs) are rapidly being deployed in Medicare, little is known about how the model might affect high-risk, high cost groups such as cancer patients. The Physician Group Practice Demonstration, which ran from 2005 to 2010 in 10 physician groups, provides the best current evidence on the likely effectiveness of accountable care organizations for Medicare beneficiaries. Changes in cancer treatment and spending under this program may be indicative of cancer treatment under ACO payment reform.
Methods: Using Medicare fee-for-service claims data, regression analysis was used to estimate changes in payments for cancer patients using a difference-in-difference design comparing pre- (2001-2004) and post-intervention (2005-2009) trends in spending on cancer patients in PGPD participants to local control groups.
Results: Regression models indicate the Physician Group Practice Demonstration was associated with average Medicare spending reductions per cancer patient of $721 annually across participating sites, an annual 3.9% reduction in payments per patient. Savings derived entirely from reductions in acute care payments for inpatient stays. The Demonstration was also associated with a reduction in mortality among cancer patients. There was no significant change in the proportion of deaths occurring in the hospital. There were significant reductions in hospice use, hospital discharges and ICU days, but no reductions in cancer-specific procedures or chemotherapy. Estimates of all measures varied considerably across participating sites.
Conclusions: The Physician Group Practice Demonstration was associated with reductions in admissions for inpatient care among beneficiaries with prevalent cancer, with no adverse effect on mortality. Participants in the Physician Group Practice Demonstration did not change the trajectory of spending for cancer-specific treatments.
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Paying physician group practices for quality: A statewide quasi-experiment
Douglas Conrad et al.
Healthcare, December 2013, Pages 108-116
Abstract:
This article presents the results of a unique quasi-experiment of the effects of a large-scale pay-for-performance (P4P) program implemented by a leading health insurer in Washington state during 2001-2007. The authors received external funding to provide an objective impact evaluation of the program. The program was unique in several respects: (1) It was designed dynamically, with two discrete intervention periods-one in which payment incentives were based on relative performance (the "contest" period) and a second in which payment incentives were based on absolute performance compared to achievable benchmarks. (2) The program was designed in collaboration with large multispecialty group practices, with an explicit run-in period to test the quality metrics. Public reporting of the quality scorecard for all participating medical groups was introduced 1 year before the quality incentive payment program's inception, and continued throughout 2002-2007. (3) The program was implemented in stages with distinct medical groups. A control group of comparable group practices also was assembled, and difference-in-differences methodology was applied to estimate program effects. Case mix measures were included in all multivariate analyses. The regression design permitted a contrast of intervention effects between the "contest" approach in the sub-period of 2003-2004 and the absolute standard, "achievable benchmarks of care" approach in sub-period 2005-2007. Most of the statistically significant quality incentive program coefficients were small and negative (opposite to program intent). A consistent pattern of differential intervention impact in the sub-periods did not emerge. Cumulatively, the probit regression estimates indicate that neither the quality scorecard nor the quality incentive payment program had a significant positive effect on general clinical quality. Based on key informant interviews with medical leaders, practicing physicians, and administrators of the participating groups, the authors conclude that several factors likely combined to dampen program effects: (1) modest size of the incentive; (2) use of rewards only, rather than a balance of rewards and penalties; (3) targeting incentive payments to the group, thus potentially weakening incentive effects at the individual level.
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The Influence of State Policy and Proximity to Medical Services on Health Outcomes
Jing Li
Journal of Urban Economics, March 2014, Pages 97-109
Abstract:
This paper examines two factors that help to explain geographic variation in health outcomes. The first factor concerns proximity to medical services. The second factor is state-specific health care policy that may impede access to nearby medical services. Four key findings are obtained. First, the effect of local doctors on reducing mortality rates of various diseases in a county attenuates with distance. Second, at approximately the same distance, in-state doctors contribute more to lowering mortality rates in the primary county than do out-of-state doctors. Third, the lesser impact of nearby out-of-state doctors is further reduced when the primary state adopts more stringent policies that restrict entry of out-of-state physicians. Fourth, the impact of nearby doctors is found to be stronger in more urbanized areas. This is consistent with agglomeration economies being effective in contributing, at least in part, to the productivity of treating patients.
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The Effect of Patient Cost Sharing on Utilization, Health, and Risk Protection
Hitoshi Shigeoka
NBER Working Paper, December 2013
Abstract:
This paper exploits a sharp reduction in patient cost sharing at age 70 in Japan, using a regression discontinuity design to examine its effect on utilization, health, and financial risk arising from out-of-pocket expenditures. Due to the national policy, cost sharing is 60-80 percent lower at age 70 than at age 69. I find that both outpatient and inpatient care are price sensitive among the elderly. While I find little impact on mortality and other health outcomes, the results show that reduced cost sharing is associated with lower out-of-pocket expenditures, especially at the right tail of the distribution.
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A Profitability Evaluation of America's Best Hospitals, 2000-2008
W.C. Benton
Decision Sciences, December 2013, Pages 1139-1153
Abstract:
Each year U.S. News and World Report evaluates more than 5,000 U.S. hospitals, of which approximately 3% are considered the best hospitals in America, and hospital profitability has emerged as a business objective for these hospitals. This study investigates the profitability performance of the best (highest quality) hospitals in the United States. A 9-year longitudinal investigation of profitability for the best hospitals in the United States is conducted. The results offer evidence that the primary drivers of hospital profitability are the case mix index and daily bed capacity. In terms of hospital profitability, there appears to be a tradeoff between these two factors. Finally, caution must be used when ranking U.S. News and World Report Honor Roll hospitals, in terms of profitability and performance.
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Analysis Of Hospital Production: An Output Index Approach
Martin Gaynor, Samuel Kleiner & William Vogt
Journal of Applied Econometrics, forthcoming
Abstract:
In this study, we develop and implement an output index approach to the estimation of hospital cost functions that reflects the differentiated nature of hospital care. The approach combines the estimation of an output index within a flexible functional form. We find, in an application to California hospitals, evidence of scope economies across specialties within primary care, and diseconomies of scope within secondary and tertiary care. Minimum efficient scale is reached at larger levels of output than would be estimated by conventional techniques. These results indicate the importance of accounting for firm output heterogeneity when estimating cost functions.
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David Shahian et al.
Medical Care, January 2014, Pages 38-46
Background: Under the Affordable Care Act, health care reimbursement will increasingly be linked to quality and costs. In this environment, teaching hospitals will be closely scrutinized, as their care is often more expensive. Furthermore, although they serve vital roles in education, research, management of complex diseases, and care of vulnerable populations, debate continues as to whether teaching hospitals deliver better outcomes for common conditions.
Objective: To determine the association between risk-standardized mortality and teaching intensity for 3 common conditions.
Research Design: Using CMS models, 30-day risk-standardized mortality rates were compared among US hospitals classified as Council of Teaching Hospital (COTH) members, non-COTH teaching hospitals, or nonteaching hospitals. These analyses were repeated using ratios of interns and residents to beds to classify teaching intensity.
Subjects: The study cohort included Medicare fee-for-service beneficiaries aged 66 years or older hospitalized in acute care hospitals during 2009-2010 for acute myocardial infarction (N=342,145), heart failure (N=647,081), or pneumonia (N=598,366).
Outcome Measure: The 30-day risk-standardized mortality rates for each condition, stratified by teaching intensity.
Results: For each diagnosis, compared with nonteaching hospitals there was a 10% relative reduction in the adjusted odds of mortality for patients admitted to COTH hospitals and a 6%-7% relative reduction for patients admitted to non-COTH teaching hospitals. These findings were insensitive to the method of classifying teaching intensity and only partially explained by higher teaching hospital volumes.
Conclusions: Health care reimbursement strategies designed to increase value should consider not only the costs but also the superior clinical outcomes at teaching hospitals for certain common conditions.
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Do Hospitals Without Physicians on the Board Deliver Lower Quality of Care?
Ge Bai & Ranjani Krishnan
American Journal of Medical Quality, forthcoming
Abstract:
This study examines whether hospitals without physician participation on their boards of directors deliver lower quality of care. Using data from California nonprofit hospitals from 2004 to 2008, we document that the absence of physicians on the board is associated with a decrease of 3-5 percentage points in three out of four measures of care quality. We obtain this result using regression analysis, which controls for various hospital characteristics. We also identify factors that influence quality of care in hospitals. Specifically, hospital size, church affiliation, urban location, and system affiliation are positively associated with quality of care; proportion of Medicaid patient revenue and poverty level of the county where the hospital is located are negatively associated with quality of care. These results highlight the importance of physician participation in hospital governance and indicate areas for hospitals and policy makers to focus on to enhance medical quality management.
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Qian Gu et al.
Health Services Research, forthcoming
Objective: To explore the impact of the Hospital Readmissions Reduction Program (HRRP) on hospitals serving vulnerable populations.
Data Sources/Study Setting: Medicare inpatient claims to calculate condition-specific readmission rates. Medicare cost reports and other sources to determine a hospital's share of duals, profit margin, and characteristics.
Study Design: Regression analyses and projections were used to estimate risk-adjusted readmission rates and financial penalties under the HRRP. Findings were compared across groups of hospitals, determined based on their share of duals, to assess differential impacts of the HRRP.
Principal Findings: Both patient dual-eligible status and a hospital's dual-eligible share of Medicare discharges have a positive impact on risk-adjusted hospital readmission rates. Under current Centers for Medicare and Medicaid Service methodology, which does not adjust for socioeconomic status, high-dual hospitals are more likely to have excess readmissions than low-dual hospitals. As a result, HRRP penalties will disproportionately fall on high-dual hospitals, which are more likely to have negative all-payer margins, raising concerns of unintended consequences of the program for vulnerable populations.
Conclusions: Policies to reduce hospital readmissions must balance the need to ensure continued access to quality care for vulnerable populations.
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Managing Manifest Diseases, But Not Health Risks, Saved PepsiCo Money Over Seven Years
John Caloyeras et al.
Health Affairs, January 2014, Pages 124-131
Abstract:
Workplace wellness programs are increasingly popular. Employers expect them to improve employee health and well-being, lower medical costs, increase productivity, and reduce absenteeism. To test whether such expectations are warranted, we evaluated the cost impact of the lifestyle and disease management components of PepsiCo's wellness program, Healthy Living. We found that seven years of continuous participation in one or both components was associated with an average reduction of $30 in health care cost per member per month. When we looked at each component individually, we found that the disease management component was associated with lower costs and that the lifestyle management component was not. We estimate disease management to reduce health care costs by $136 per member per month, driven by a 29 percent reduction in hospital admissions. Workplace wellness programs may reduce health risks, delay or avoid the onset of chronic diseases, and lower health care costs for employees with manifest chronic disease. But employers and policy makers should not take for granted that the lifestyle management component of such programs can reduce health care costs or even lead to net savings.
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Are Dual Eligibles Admitted to Poorer Quality Skilled Nursing Facilities?
Momotazur Rahman et al.
Health Services Research, forthcoming
Background: Dual eligibles, persons who qualify for both Medicare and Medicaid coverage, often receive poorer quality care relative to other Medicare beneficiaries.
Objectives: To determine whether dual eligibles are discharged to lower quality post-acute skilled nursing facilities (SNFs) compared with Medicare-only beneficiaries.
Research Design: Following the random utility maximization model, we specified a discharge function using a conditional logit model and tested how this discharge rule varied by dual-eligibility status.
Subjects: A total of 692,875 Medicare fee-for-service patients (22% duals) who were discharged for Medicare paid SNF care between July 2004 and June 2005.
Measures: Medicare enrollment and the Medicaid Analytic Extract files were used to determine dual eligibility. The proportion of Medicaid patients and nursing staff characteristics provided measures of SNF quality.
Results: Duals are more likely to be discharged to SNFs with a higher share of Medicaid patients and fewer nurses. These results are robust to estimation with an alternative subsample of patients based on primary diagnoses, propensity of being dual eligible, and likelihood of remaining in the nursing home.
Conclusions: Disparities exist in access to quality SNF care for duals. Strategies to improve discharge planning processes are required to redirect patients to higher quality providers, regardless of Medicaid eligibility.
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Contextual Determinants of US Nursing Home Racial/Ethnic Diversity
Jullet Davis et al.
Social Science & Medicine, forthcoming
Abstract:
We hypothesized that for-profit/chain affiliated nursing homes, those in states with higher Medicaid reimbursement, and those in more competitive markets would have greater resident racial/ethnic diversity than nursing homes not meeting these criteria. Using 2004 Online Survey, Certification and Reporting data, Minimum Data Set, Lewis Mumford Center for Comparative Urban and Regional Research data, and the Area Resource File, we included U.S. Medicare/Medicaid certified nursing homes (N= 8,950) located in 310 Metropolitan Statistical Areas. The dependent variable quantified facility-level multiracial diversity. Ordinary least squares regression showed support for the hypothesized relationships: for-profit/chain affiliated nursing homes were more diverse than nursing homes in all other ownership/chain member categories, while higher Medicaid per-diem rates, greater residential diversity, and stronger market competition were also positively associated with nursing home racial/ethnic composition. Results suggest there is room for policy changes to achieve equitable access to all levels of nursing home services for minority elders.
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The Impact of Electronic Health Records on Workflow and Financial Measures in Primary Care Practices
Neil Fleming et al.
Health Services Research, forthcoming
Objective: To estimate a commercially available ambulatory electronic health record's (EHR's) impact on workflow and financial measures.
Data Sources/Study Setting: Administrative, payroll, and billing data were collected for 26 primary care practices in a fee-for-service network that rolled out an EHR on a staggered schedule from June 2006 through December 2008.
Study Design: An interrupted time series design was used. Staffing, visit intensity, productivity, volume, practice expense, payments received, and net income data were collected monthly for 2004-2009. Changes were evaluated 1-6, 7-12, and >12 months postimplementation.
Data Collection/Extraction Methods: Data were accessed through a SQLserver database, transformed into SASR, and aggregated by practice. Practice-level data were divided by full-time physician equivalents for comparisons across practices by month.
Principal Findings: Staffing and practice expenses increased following EHR implementation (3 and 6 percent after 12 months). Productivity, volume, and net income decreased initially but recovered to/close to preimplementation levels after 12 months. Visit intensity did not change significantly, and a secular trend offset the decrease in payments received.
Conclusions: Expenses increased and productivity decreased following EHR implementation, but not as much or as persistently as might be expected. Longer term effects still need to be examined.
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The Association between EHRs and Care Coordination Varies by Team Cohesion
Ilana Graetz et al.
Health Services Research, forthcoming
Objective: To examine whether primary care team cohesion changes the association between using an integrated outpatient-inpatient electronic health record (EHR) and clinician-rated care coordination across delivery sites.
Study Design: Self-administered surveys of primary care clinicians in a large integrated delivery system, collected in 2005 (N = 565), 2006 (N = 678), and 2008 (N = 626) during the staggered implementation of an integrated EHR (2005-2010), including validated questions on team cohesion. Using multivariable regression, we examined the combined effect of EHR use and team cohesion on three dimensions of care coordination across delivery sites: access to timely and complete information, treatment agreement, and responsibility agreement.
Principal Findings: Among clinicians working in teams with higher cohesion, EHR use was associated with significant improvements in reported access to timely and complete information (53.5 percent with EHR vs. 37.6 percent without integrated-EHR), agreement on treatment goals (64.3 percent vs. 50.6 percent), and agreement on responsibilities (63.9 percent vs. 55.2 percent, all p < .05). We found no statistically significant association between use of the integrated-EHR and reported care coordination in less cohesive teams.
Conclusion: The association between EHR use and reported care coordination varied by level of team cohesion. EHRs may not improve care coordination in less cohesive teams.