Cost

Authors: Brach C, and Fraser I.
Title: Reducing Disparities through Cultural Competent Health Care: An Analysis of the Business Case.
Publication: Quality Management in Health Care 10(4):15-28.
Date: 2002
Abstract: The persistence of racial and ethnic disparities in health care access, quality, and outcomes has prompted considerable interest in increasing the cultural competence of health care, both as an end in its own right and as a potential means to reduce disparities. Health care organizations have financial incentives to become culturally competent, but limitations inherent in these incentives must be overcome if cultural competence is to become widespread.
Availability: AHRQ Publication No. 02-R081 is available from the AHRQ Publications Clearinghouse.

Authors: Friedman B., Devers K., Steiner C., Fox, S.
Title: The Use of Expensive Health Technologies in the Era of Managed Care: The Remarkable Case of Neonatal Intensive Care.
Publication: Journal of Health Politics, Policy and Law 27(3)441-64
Date: 2002.
Abstract: The use of neonatal intensive care (NIC) continued to rise rapidly in the 1990s despite the concerns of observers about cost-effectiveness of NIC in some cases and better outcomes in facilities with high volume and capabilities. The study tested the effects of insurance type, competition among hospitals, and market pressure from managed care plans on the supply and cost of NIC. Key findings are that the decision of a hospital to offer NIC was associated with teaching status, the proportion of infants in the market area with high documented risk, and the market concentration of major competitors. The market share of managed care plans, and the concentration of enrollment, was not associated with NIC being offered or the standardized charges. Whether a particular patient was admitted to a NICU depended on patient risk factors, whether a NICU was present, but not on payer group. The results are consistent with the hypothesis that young insured parents (with the advice of their obstetricians) prefer hospitals with NIC, and also are relatively profitable enrollees for health plans.

Authors: Friedman B, De La Mare J, Andrews R, McKenzie D.
Title: Estimating Hospital Cost for Discharged Patients—Practical Options in an Era of Data Restrictions.
Publication: Journal of Healthcare Finance 29(1):1-13.
Date: 2002.
Abstract: Analysts often estimate the cost of hospital services by applying cost/charge ratios from Federal or State data sources to the charges provided on hospital discharge records. Recently, a number of sources of discharge data are not permitting release of hospital identities. This study compares several sources of cost/charge data for use in the restricted environment. Accounting data from four State systems and from files of the federal Health Care Financing Administration (HCFA) are employed. In one analysis hospitals are grouped by selected characteristics. Cost/charge varies by state and characteristics. Some HCFA and State measures track each other closely. A wider analysis of hospital-specific data for 51 states offers a separate test and extension of the initial results. The study supports a practical policy option of releasing grouped cost/charge ratios attached to discharge records when identity must be masked.

Author: Basu J, Friedman B.
Title: Hospitalization of children for ambulatory care sensitive conditions: Determinants of patient flows in a large State.
Publication: Health Economics 10(1)67-78.
Date: 2001
Abstract: The study examines the influence of key policy variables such as types of insurance, and local supply of primary care, and patient characteristics such as race, and severity of illness, among others, on out-of-area use of hospitals by children with diagnoses defined as ambulatory care sensitive (ACS) conditions. Hospital discharge data for New York residents admitted to hospitals in New York, Pennsylvania, New Jersey or Connecticut in 1994 are used. Patient-level data are merged with the Area Resource file (ARF), and American Hospital Association (AHA) surveys. Hypotheses are developed from a model that links the choices of families residing in a local area, supply considerations of ambulatory care providers, HMOs and hospitals, determining the admissions to hospitals for ACS conditions in an out-of-area hospital. The study uses logistic regression to predict travel out of the local area for ACS admission. The study finds that HMOs do not especially take members outside the area when hospital care is needed. Inadequate primary care could cause significant patient flows. Severity of illness significantly affects flows out of the local area and children with nonwhite race tend to stay in. The implications of these findings might be that a greater availability of local primary care physicians could reduce the movement of children outside the county. This could be more effective in areas with more nonwhites and Medicaid patients because those are the areas associated with higher occurrence rates, and a higher likelihood of patients to stay locally. Future research will compare patient flows for ACS conditions with other conditions such as those treated with elective procedures, use other age groups, and examine the time trends for ACS conditions.

Authors: Encinosa W, Seldon T.
Title: Designing Employer Health Benefits for Heterogeneous Workforces: Risk Adjustment and Its Alternatives.
Publication: Inquiry 38:270-9.
Date: Fall 2001
Abstract: Many health economists recommend that employers provide employees with a risk-adjusted choice among competing health insurance plans. Formal risk adjustment is, however, rarely if ever used by employers. This paper examines a range of health benefit design options that are available to employers, focusing attention not only on risk adjustment but also on its alternatives. We argue that while formal risk adjustment is rare, employers commonly use strategies that accomplish some of the same objectives and at less cost.

Author: Encinosa W.
Title: A comment on Neudeck and Podczeck's "adverse selection and regulation in health insurance markets."
Publication: Journal of Health Economics 20(4): 667-73.
Date: 2001
Abstract: Using the Grossman equilibrium concept, Neudeck and Podczeck (Journal of Health Economics 15:387) show that imposing a minimum standard on a perfectly competitive insurance market can result in anti-competitive effects: decreased welfare with some insurers earning positive profits. However, the Grossman concept precludes an insurer from offering two separating, cross-subsidizing health plans. When an insurer can offer multiple plans (as under both the Nash and Miyazaki-Wilson equilibrium concepts), minimum standards result in a doubleton equilibrium, never allow positive total profits, and increase welfare. This is of interest since in 1997 more than half of establishments in the US offering choice of multiple plans did so through a single insurer.

Author: Encinosa W.
Title: The economics of regulatory mandates on the HMO market
Publication: Journal of Health Economics 20(1):85-107.
Date: 2001
Abstract: Recently proposed HMO regulations have involved mandates of two forms: (1) minimum quality standards, and (2) mandated increases in access to specialty care. The author shows that piecemeal regulation, which uses only one of either mandate, may decrease welfare for all HMO consumers. Under full regulation using both mandates, if the minimum standard is set too low, a floor-to-ceiling effect occurs. This involves HMOs setting quality at the minimum standard, even when their quality would be above the standard in an unregulated market. Finally, the author show how premiums may either increase or decrease under a mandate.

Authors: Fleishman J, Hellinger F.
Title: Trends in HIV-Related Inpatient Admissions and Deaths: A Seven-State Study.
Publication: Journal of Acquired Immune Deficiency Syndromes 28(1):73-80.
Date: 2001
Abstract: Reports of declining HIV-related inpatient utilization since the introduction of combination antiretroviral therapy have typically been based on data from a single institution or locality. This study examines trends in HIV-related inpatient admission rates from 1993 through 1997, using a negative binomial analysis of comprehensive data from seven states. We used comprehensive hospital discharge data from seven states, from the State Inpatient Database of the Healthcare Costs and Utilization Project. HIV-related inpatient admission rates rose between 1993 and 1995, but then showed sharp and steady declines starting in late 1995. This general pattern was observed for all seven states, and did not differ by patients' gender or race/ethnicity. Admission rates were highest for black males and lowest for white females. The rate at which HIV-related admissions ended in the death of the patient also declined steadily after 1995. The inpatient death rate for women was lower than that for men, but racial/ethnic differences in death rates were not significant. These results confirm and extend previous reports of reduced HIV-related inpatient utilization subsequent to the advent of combination antiretroviral therapy.

Authors: Hellinger F, Fleishman J.
Title: Location, Race, and Hospital Care for AIDS Patients: An Analysis of Ten States.
Publication: Inquiry 38:319-30.
Date: Fall 2001
Abstract: This study is the first statewide comparison of hospital utilization and inpatient mortality rates for persons with Acquired Immune Deficiency Syndrome (AIDS). Data from 120,772 hospital discharge abstracts for all AIDS-related admissions in 10 states (California, Colorado, Florida, Iowa, Kansas, Maryland, New Jersey, New York, Pennsylvania, and South Carolina) in 1996 were combined with data on the number and the racial and ethnic characteristics of all persons living with AIDS (PLWAs) in each state. These data were used to derive population-based estimates of the utilization of hospital services per PLWA and of inpatient mortality rates in each state. Multivariate analyses examined sources of variation in inpatient length of stay and inpatient mortality. The primary finding of this study is that hospital utilization rates and inpatient mortality rates for persons with AIDS vary substantially across states and among racial and ethnic groups within states even after adjusting for severity of illness. Blacks and Hispanics had longer hospital stays and were more likely to die in the hospital than whites. State-level policies, such as home and community-based waiver programs and enhanced HIV reimbursement rates, significantly affected hospital use.

Authors: Luce BR, Zangwill KM, Palmer CS, et al.
Title: Cost-effectiveness analysis of an intranasal influenza vaccine for the prevention of influenza in healthy children.
Publication: Pediatrics 108(2):e24.
Date: 2001
Abstract: This study determined the potential cost-effectiveness of intranasal influenza vaccine among young, healthy children. The analysis included prospectively collected 2-year clinical trial data supplemented with data from the literature. Results indicated that routine use of intranasal influenza vaccine among healthy children may be cost-effective and cost-effectiveness may be maximized by using group-based vaccination approaches.

Authors: Revicki DA, Kobayashi M, Palmer CS, et al.
Title: Burden of schizophrenia in Japan: Impact on patients, families and society.
Publication: Schizophrenia Frontier 2(41)41-49.
Date: 2001
Abstract: Schizophrenia places a significant financial burden on Japanese society and the health care system. Patients with the disorder suffer stigma, impaired functioning, disability, and decreased quality of life and family members caring for relatives with schizophrenia suffer a financial burden, and psychological distress and caregiver burden. The newer atypical antipsychotics not yet commonly available in Japan may help improve patient functioning and quality of life, enabling fuller benefits from psychosocial programs, and reintegrating patients as productive members of the community. There are opportunities to benefit patients, their families, and society through improved treatment and provision of community-based services for schizophrenia.

Authors: Spector W., Mukamel D.
Title: Nursing home administrators' perceptions of competition and strategic responses.
Publication: Long Term Care Interface 2(3):37-41.
Date: March 2001
Abstract: This paper presents findings from a 1999 mailed survey of nursing home administrators in New York State, designed to elicit their perceptions of competition in the nursing home market and their strategic plans to cope with changing market conditions. Results show that administrators think that nursing home markets have become more competitive and expect this trend to continue. They perceive differences in the way individual customers choose nursing homes versus the way MCOs and hospitals make such choices. They believe that individual consumers place a higher value on quality of life factors, while aggregate purchasers rate price and the availability of complex sub-acute services higher. Strategic responses by nursing homes varied by ownership type.

Authors: Wong H., Hellinger F.
Title: Conducting Research on the Medicare Market: The Need for Better Data and Methods.
Publication: Health Services Research 36(1 Part 2):291-308.
Date: 2001
Abstract: This study highlights data limitations, the need to improve data collection, the need to develop better analytic methods, and the need to use alternative data sources to conduct research related to the Medicare program. These objectives are achieved by reviewing existing studies on risk selection in Medicare HMOs, examining their data limitations, and introducing a new approach that circumvents many of these shortcomings. Data for 1995-97 for five States (Arizona, Florida, Massachusetts, New York, and Pennsylvania) from the HCUP State Inpatient Databases (SID), maintained by AHRQ and the Health Care Financing Administration's Medicare Managed Care Market Penetration Data Files and Medicare Provider Analysis and Review Files are used in this study. The authors analyzed hospital utilization rates for Medicare beneficiaries in the traditional fee-for-service Medicare and Medicare HMO sectors and examine the relationship between these rates and the Medicare HMO penetration rates. Medicare HMOs were found to have lower hospital utilization rates than their fee-for-service counterparts, differences in utilization rates vary across States, and that HMO penetration rates are inversely related to the rough measure of favorable selection. The authors conclude that substantial growth in Medicare HMO enrollment and the implementation of a new risk-adjusted payment system have led to an increasing need for research on the Medicare program. Improved data collection, better methods, new creative approaches, and alternative data sources are needed to address these issues in a timely and suitable manner.

Author: Chernew M, Encinosa W, Hirth R.
Title: Optimal health insurance: The case of multiple treatment options
Publication: Journal of Health Economics 19:(5)585-609.
Date: 2000
Abstract: The authors explore optimal cost-sharing provisions for insurance contracts when individuals have observable, severe diseases with a discrete number of medically appropriate treatment options. Variation in preferences for alternative treatments is unobserved by the insurer and non-contractible. Interest in such situations is increasingly common, exemplified by disease carve-out programs and shared decision making tools. The authors demonstrate that optimal insurance charges a copay to patients choosing the high cost treatment and provides consumers of the low cost treatment a cash payment. A simulation of the effect of such a policy, based on prostate cancer, indicates a substantial reduction in moral hazard.

Authors: Hellinger FJ, Fleishman JA.
Title: Estimating the national cost of treating people with HIV disease: Patient, payer, and provider data.
Publication: Journal of Acquired Immune Deficiency Syndrome 24(2):182-8.
Date: 2000
Abstract: Existing estimates of the national cost of treating all people with HIV disease use data from a sample of people with HIV disease to extrapolate the cost of treating all people with HIV disease (patient-based approach). This study derives estimates using two novel approaches (i.e., payer-based and provider-based) and compares these with existing estimates. The data sources include the Health Insurance Association of American and the American Council of Life Insurance 1996 HIV survey, the 1996 State Inpatient Databases (SID) maintained by AHRQ, and the IMS America Ltd. survey of independent and chain drugstores. The authors found that the cost of treating all people with HIV disease in 1996 was between $6.7 and $7.8 billion, and the average annual cost of treating a person with HIV disease was between $20,000 and $24,700. They concluded that analysts should derive estimates of the cost of treating people with HIV disease by using several different approaches.
Availability: AHRQ Publication No. 00-R058 is available from the AHRQ Publications Clearinghouse and InstantFAX.

Author: Hellinger FJ, Wong HS.
Title: Selection bias in HMOs: A review of the evidence.
Publication: Med Care Res Rev 57(4):405-39
Date: 2000
Abstract: Many studies have compared the characteristics of persons who join HMOs with those of persons who join fee-for-service plans, and several studies have reviewed findings regarding selection bias in HMOs. This article extends the findings of previous reviews by including information from studies published through 1999. This is important because of the rapid diffusion of HMOs in all markets and recent changes in the way public programs are organizing and paying for care from HMOs. This article also examines recent changes in how HMOs are paid. This is important because recent changes in payment methodologies may reduce, or eliminate, overpayments to HMOs resulting from selection bias. For example, changes in Medicare's risk adjustment system implemented in January 2000 unquestionably mitigate the impact of favorable selection on HMO payments.
Availability: AHRQ Publication No. 01-R026 is available from the AHRQ Publications Clearinghouse.

Authors: Mukamel DB, Spector WD.
Title: Nursing home costs and risk-adjusted outcome measures of quality.
Publication: Med Care 38(1):78-89.
Date: 2000
Abstract: The inadequacy of quality of care in nursing homes has been and continues to be a focus of public concerns. Understanding the relationship between quality and costs can offer guidance to policies designed to encourage high quality. The study's objectives were to investigate the relationship between costs and quality of care in nursing homes, and to test the hypothesis that higher quality may be associated with lower costs. Statistical regression techniques were used to estimate nursing home variable-cost functions that included three risk-adjusted outcome measures of quality. Quality measures were based on decline in functional status, worsening pressure ulcers, and mortality. The study hypothesis was tested by an F test for the exclusion of nonlinear quality variables in the cost functions. The study included 525 free-standing private and public nursing homes in New York State, or 84 percent of all nursing homes in the state during 1991. F tests rejected the hypotheses that the three quality measures could be excluded from the cost function and that the association between costs and quality was linear. An inverted U-shape relationship between quality and costs suggests that there are quality regimens in which higher quality is associated with lower costs. Policies that encourage research to identify care protocols and management strategies leading to better outcomes and lower costs, as well as policies that encourage dissemination of such practices, may prevent decline in quality despite the continued financial constraints faced by nursing homes.
Availability: AHRQ Publication No. 00-R019 is available from the AHRQ Publications Clearinghouse and InstantFAX.

Author: Young GJ, Desai KR, Hellinger FJ.
Title: Community control and pricing patterns of nonprofit hospitals: An antitrust analysis.
Publication: Journal of Health Politics, Policy, and Law 25(6):1051-81.
Date: 2000
Abstract: The traditional control of nonprofit hospitals by the communities they serve has been offered as a justification for restraining antitrust enforcement of mergers involving nonprofit hospitals. Community control is arguably a constraint on a nonprofit hospital's inclination to exercise market power in the form of higher prices. However, community control is likely to be attenuated for hospitals that through merger or acquisition become members of hospital systems, particularly those that operate on a regional or multi-regional basis. In this paper, the authors report findings from a study in which they used a panel data set to examine empirically the relationship between market concentration and price growth for three types of nonprofit hospitals: independent (or stand alone) facility, member of local hospital system, and member of nonlocal hospital system. Study results indicated that (1) all three types of nonprofit hospitals exercised market power in the form of higher prices and (2) hospitals that were members of nonlocal systems were more aggressive in exercising market power than were either independent or local system hospitals. The results have important implications for antitrust enforcement policy.

Authors: Elixhauser A, Halpern M.
Title: Economic evaluations of pancreatic and gastric cancer.
Publication: Hepato-Gastroenterology 46:1206-13.
Date: 1999
Abstract: The total cost of cancer care in the United States is about $146 billion, of which pancreatic cancer comprises $2.6 billion (1.8 percent of the total) and gastric cancer comprises $1.8 billion (1.3 percent). The authors have reviewed published studies presenting economic analysis of treatment or followup for patients with pancreatic or gastric cancer. Relatively few studies report on economic evaluations of pancreatic cancer care. There are also few economic studies for gastric cancer, although the authors identified three cost-effectiveness analyses. In general, economic analyses in these areas are relatively unsophisticated, relying on charge data or simple multipliers (e.g., average cost per day in the hospital multiplied by days in the hospital), and are often limited to in-hospital costs (particularly studies for pancreatic cancer). A wide range of costs are included in these studies and a variety of methodologies for assigning costs are used, making comparisons between studies difficult. Future health economics research in this area should evaluate the costs and effectiveness of alternative practice patterns for gastric and pancreatic cancer; conduct additional cost-effectiveness analyses of chemotherapeutic interventions; consider quality of life, survival, stage at diagnosis, patient-borne costs, and complications of therapy; and take advantage of administrative data from large populations.

Author: Encinosa W, Sappington D.
Title: Adjusted community rate reforms to promote HMO participation in Medicare+ Choice.
Publication: Health Care Financing Review 21(1)19-29.
Date: 1999
Abstract: The authors review the financial regulations imposed on HMOs that participate in the Medicare+ Choice program, and identify elements of the regulations that may discourage HMO participation in the program. They propose modifications of the regulations that can encourage the participation of HMOs without affording them excessive profit. The modifications include smoothing and bounding profit estimates, and authorizing and encouraging expanded use of benefit stabilization funds.

Author: Friedman B.
Title: Excess capacity: Commentary on the evolution of analysis and policy.
Publication: Health Services Research 33(6):1669-82.
Date: 1999
Abstract: This article is a response to "Excess capacity: Markets, regulations, and values," written by Professor Carolyn Madden. Dr. Friedman formulates more carefully and augments Professor Madden's assessment of divergent viewpoints on the issues of excess bed capacity and costs in hospitals, as well as questions the evidence for her conclusions about changes in dominant conceptual frameworks.
Availability: AHCPR Publication No. 99-R046 is available from the AHRQ Publications Clearinghouse.

Author: Friedman B, Steiner C.
Title: Does managed care affect the supply and use of ICU services?
Publication: Inquiry 1999 Spring;(36):68-77.
Date: 1999
Abstract: In two States that differ greatly in hospital ownership and history of regulation, we find that the services per ICU user are less for managed care patients than for other privately insured. In Massachusetts, the differences across payers disappear for hospitals where the total supply of ICU is low in relation to expected demand. In both States, admission to ICU is not significantly different between managed care and other privately insured.
Availability: AHCPR Publication No. 99-R071 is available from the AHRQ Publications Clearinghouse and InstantFAX.

Authors: Luce B, Elixhauser A.
Title: Documenting the value of your product—Outcomes research for medical devices.
Publication: Medical Devices and Diagnostic Imaging 1999 Jan:159-68.
Date: 1999
Abstract: The market for medical technologies is changing. This market is more austere and more demanding, and new technologies are being scrutinized more closely than ever before. This article describes the new medical marketplace and helps device manufacturers become proactive in demonstrating the value of their products. Rather than trying to catch up when the demands for information are thrust upon them, a proactive approach helps smooth the way for product development, marketing, and acceptance.

Authors: Palmer CS, Niparko JK, Wyatt JR, et al.
Title: A prospective study: cost-utility of the multichannel cochlear implant.
Publication: Archives of Otolaryngology 125(11):1221-28.
Date: 1999
Abstract: Cochlear implants can benefit individuals with advanced hearing loss insufficiently aided by hearing aids. This study determined the cost per QALY gained with implantation of a multichannel cochlear implant. Health utility and cost data were prospectively collected over 12 months in adults with severe to profound hearing loss. Results indicated a very favorable cost/QALY for those who received an implant compared with those who did not.

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