Cross-subsidies and payment for hospital care

This study uses hospital data from the 1979 American Hospital Association Reimbursement Survey in a multivariate framework to assess the impact of discounts and third-party reimbursement on hospital costs and profitability. Three central issues are addressed: (1) Is a differential payment justified for Medicare, Medicaid, and/or Blue Cross on the basis of differential costs? (2) Have the cost-containment efforts of the dominant payers reduced total payments to hospitals? and (3) What part of the overall savings in payments to hospitals is in the form of reduced costs rather than reduced profits? On the basis of the evidence in this study, we find (1) that the differential payment is not justified; (2) that the cost-containment efforts of the dominant payers have reduced total payments to hospitals somewhat, but a substantial amount of cost-shifting remains; and (3) that the savings is in profits, rather than in costs.     

MEASURING THE RATE OF RETURN FOR COMPETITION LAW

This paper focuses on the application and interpretation ofmeasures of rate of return for competition law. Amongst otherresults, we analyse how outsourcing and similar arrangementsimpact the rate of profitability and show that the measurementis more volatile the greater the rate of profit (suggestingthat the measures are most problematic when they are most needed).We identify and interpret the outsourcing arrangements thatprovide the lowest rate of profit and show that these arrangementshave a close relationship to net present value. Finally, weprovide suggestions to make profitability measures more informativefor competition law.     

The competitive impact of health maintenance organizations on hospital finances: an exploratory study

In this study we explore whether HMO-induced competition has contained expenditures in Minneapolis/St. Paul hospitals. Specifically, we assessed the impact of HMOs on revenue, cost, and net income per admission in Twin Cities hospitals from 1979 to 1981. Some HMOs have obtained negotiated discounts from hospitals. We found that hospitals which gave larger discounts did not have lower costs per admission. This finding suggest that discounts do not force hospitals to operate more efficiently. In addition, hospitals with a large share of patients from HMOs or government Medicare and Medicaid programs did not have lower costs per admission than other hospitals during the years from 1979 to 1981. This finding casts doubt on the claim that discounts are justified by lower costs for HMO or government patients. Finally, neither HMO market share nor discounts had an adverse effect on hospital profits. During the three years studied, hospital profits in the Twin Cities showed an upward trend. This study concludes that if competition is to succeed it must encompass more than HMOs. HMOs may be important, but they are only one agent in the market. Thus, public policy created to induce competition must go beyond the simple stimulus of HMO growth.     

The use of expensive health technologies in the era of managed care: the remarkable case of neonatal intensive care

The use of neonatal intensive care (NIC) continued to rise rapidly in the 1990s despite the concerns of observers about its cost effectiveness and its successes being mostly in facilities with high volume and capabilities. The objective of this study is to test the effects of insurance type, competition among hospitals, and market pressure from managed care plans on the supply and cost of NIC. The analysis uses logistic and linear models with techniques to avoid bias from (a) market area definitions based on actual patient flows and (b) self-selection of hospitals by patients with unmeasured risk of needing NIC. The data source contains all births in short-term hospitals in New Jersey during 1990 and 1994. Both the number of days and charges for NIC are reported. 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 documented high risk, and the market concentration of major competitors. The market share of managed care plans and the concentration of enrollment were not associated with either NIC being offered or with the standardized charges. Whether a particular patient was given to a NIC depended on patient risk factors and whether a NIC unit 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. In conclusion: using the results here and in other research, public and private policy makers may consider several ways to strengthen the incentives for health plans to contract for cost-effective birth-related services. The results also raise questions for a number of regulatory and payment policies and call for better public data on costs and outcomes for NIC.     

How a luxury monopolist might benefit from the aspirational utility effect of counterfeiting?

Thanks to an intertemporal analytical model, we incorporate aspirational consumers in Veblen markets for luxury fashion items. We show how a luxury monopolist can increase its profits thanks to the presence of counterfeit products. The genuine producer profit is shaped by two opposite effects: (1) a positive aspirational effect resulting from a sales increase due to the aspirational consumers who seek to imitate the lifestyle of snob consumers (2) a negative snob effect, resulting from a sales decrease due to the reduction of consumption by some snob consumers. We identify the conditions under which the overall effect generated by counterfeiting can increase the genuine firm profit. These conditions imply the existence of large aspirational effects and high additional utility gain associated with buying an original product instead of obtaining a counterfeit product.     

Is there a rationale for regionalizing organ transplantation services?

This paper explores issues in the designation of centers to provide organ transplantation procedures and aftercare, a decision faced increasingly by policymakers, planners, and payers. As background for consideration of the regionalization of organ transplantation services, an array of models of regionalization of health services, ranging from full-scale vertical integration to market-enhancing information provision, is described. In the United States, regionalization has mainly followed the designation model within the certificate-of-need system; vertical integration has been adopted only in limited ways. Next, the authors' review of current approaches to the regionalization of organ transplantation centers by public and private payers indicates that designation of centers is increasing, although the empirical evidence concerning the classes of hospitals upon which designation decisions rest is weak. The authors then review the literature on the relationship between volumes and outcomes on surgical services with particular reference to organ transplantation, which on the whole suggests that a relationship between volumes and outcomes exists. Original empirical analysis of data on kidney transplants that were secured from the Health Care Financing Administration is then presented. The study of the effects of hospital and surgeon volumes on graft and patient survival and of the effect of volume on charges found no systematic influence of hospital or surgeon volumes on graft or patient survival. Some evidence that charges are lower for larger centers was found. The authors conclude that the evidence implies that using volume as the provider characteristic upon which to base designation of transplantation centers is problematic, at least for kidney transplants. Steps policymakers might take to ensure quality of transplantation services is discussed in the final section.     

Medicare program; change in methodology for determining payment for extraordinarily high-cost cases (cost outliers) under the acute care hospital inpatient and long-term care hospital prospective payment systems. Final rule

In this final rule, we are revising the methodology for determining payments for extraordinarily high-cost cases (cost outliers) made to Medicare-participating hospitals under the acute care hospital inpatient prospective payment system (IPPS). Under the existing outlier methodology, the cost-to-charge ratios from hospitals' latest settled cost reports are used in determining a fixed-loss amount cost outlier threshold. We have become aware that, in some cases, hospitals' recent rate-of-charge increases greatly exceed their rate-of-cost increases. Because there is a time lag between the cost-to-charge ratios from the latest settled cost report and current charges, this disparity in the rate-of-increases for charges and costs results in cost-to-charge ratios that are too high, which in turn results in an overestimation of hospitals' current costs per case. Therefore, we are revising our outlier payment methodology to ensure that outlier payments are made only for truly expensive cases. We also are revising the methodology used to determine payment for high-cost outlier and short-stay outlier cases that are made to Medicare-participating long-term care hospitals (LTCHs) under the long-term care hospital prospective payment system (LTCH PPS). The policies for determining outlier payment under the LTCH PPS are modeled after the outlier payment policies under the IPPS.     

The impact of public health care financing policies on private-sector hospital costs

Two of the best-known economic models of hospital behavior are utilized to examine theoretically the issue of cross-subsidization of hospital costs between public and private-pay patients. It is shown that the existence of public/private hospital-charge differentials does not, in itself, demonstrate that public programs are subsidized by the private sector. This differential is to be expected, whether hospitals are considered to be monopolistic profit maximizers or controlled by physicians. While cost-based hospital reimbursement may be dynamically inefficient, it is shown to have certain static efficiency properties when hospitals provide services to both public and private patients.     

Medicare program; changes to the hospital inpatient prospective payment systems and fiscal year 2006 rates. Final rule

We are revising the Medicare hospital inpatient prospective payment systems (IPPS) for operating and capital-related costs to implement changes arising from our continuing experience with these systems. In addition, in the Addendum to this final rule, we describe the changes to the amounts and factors used to determine the rates for Medicare hospital inpatient services for operating costs and capital-related costs. We also are setting forth rate-of-increase limits as well as policy changes for hospitals and hospital units excluded from the IPPS that are paid in full or in part on a reasonable cost basis subject to these limits. These changes are applicable to discharges occurring on or after October 1, 2005, with one exception: The changes relating to submittal of hospital wage data by a campus or campuses of a multicampus hospital system (that is, the changes to Sec. 412.230(d)(2) of the regulations) are effective on August 12, 2005. Among the policy changes that we are making are changes relating to: The classification of cases to the diagnosis-related groups (DRGs); the long-term care (LTC)-DRGs and relative weights; the wage data, including the occupational mix data, used to compute the wage index; rebasing and revision of the hospital market basket; applications for new technologies and medical services add-on payments; policies governing postacute care transfers, payments to hospitals for the direct and indirect costs of graduate medical education, submission of hospital quality data, payment adjustment for low-volume hospitals, changes in the requirements for provider-based facilities; and changes in the requirements for critical access hospitals (CAHs).     

利益驱动视角下的新农村建设问题研究

利益问题是关系农村社会进步和发展的核心问题。当前我国农村社会利益的非和谐现象凸现,从根本上说是制度、市场、文化等多重安排使得利益驱动机制被扭曲的结果。在法学理论上导入利益基本原理,对制度、市场、文化等多维度进行考量,以纠正利益驱动作用,进而建构双重利益模式、利益聚合表达与个体利益维护互动等良性利益驱动机制,探索构建和谐社会的新思路。     

Market structure, performance, and efficiency of the Chinese banking sector

The Chinese banking system is evolving from a mono-bank system to one involving many banks of varied types and functions and there is a heated debate on whether competition can help to improve the performance and efficiency of the banks. This paper tests five hypotheses that have been proposed in the literature on the relationship between market structure, profitability, and efficiency using data envelopment analysis with a panel data of the 14 largest nationwide banks in China during the period of 1998–2007. The empirical results show clearly that neither the structure-conduct performance nor the efficient structure hypotheses hold in China. The strongest support is for the relative market power hypothesis that suggests that banks with differentiated services and products are those with higher market shares, and that they are able exercise their market power to obtain higher profits by setting higher prices. Technical efficiency has a significant effect upon bank profitability and the policy makers should promote further competition in the Chinese banking sector.     

Organizational corruption by public hospitals in China

This article studies the rise of organizational corruption by public hospitals in China since the 1990s and its impacts. Organizational corruption refers to the exploitation of public authority by a government agency for its monetary or material gains. This article argues that a combination of three major factors contributed to the rise of organizational corruption by public hospitals. First, the Chinese government substantially reduced its financial commitment to the health sector since the mid-1980s. To compensate for the retrenchment of government health outlays, public hospitals are authorized to earn revenue, keep and use all budgetary surpluses. This policy provided numerous opportunities and incentives for hospitals to engage in corruption. The second factor concerns the excessive and chaotic development of the pharmaceutical sector. Intense competition has prompted many drug firms to offer bribes to public hospitals so that their products would be purchased. Finally, the state regulatory infrastructure has failed to check the spread of corrupt practices. The study raised two broader implications. First, it highlights the pitfall of retrenchment of government outlays and the subsequent policy of allowing state agencies to generate, retain and use the revenue, in the absence of an effective regulatory infrastructure. Second, the prevalence of organizational corruption indicates that the nature of public hospitals in China has been transformed. Instead of providing efficient, safe and affordable treatment for patients, many public hospitals have engaged in predatory behavior that is harmful to patients’ health.     

Medicare prospective payment: anticipated effect on hospitals, other community agencies, and families

The switch to prospective payment for hospitals under Medicare is expected to have ramifications in a number of different areas. This paper addresses a select number of those areas: hospital organization and management, other community agencies, and families. Questions are raised as to the capacity to provide adequate care in response to the increased demand for care outside the hospital setting that will result from the new payment system.     

Hospital mergers and antitrust: an economic analysis

The hospital industry has recently experienced substantial merger activity. This paper examines several actual and proposed hospital mergers to determine the extent of competition in the affected markets and the effect these mergers may have on competition. Our focus is on mergers between hospitals in the same market. We define the relevant product and geographic market for hospitals, then develop criteria for evaluating hospital mergers and analyze several merger cases using these criteria. We conclude that these mergers threaten the competition that exists in most of the markets discussed, and that the claimed efficiency justification for mergers is not convincing.     

Uniform prices for differentiated goods: The case of the movie-theater industry

Since the early 1970s, movie theaters in the United States have employed a pricing model of uniform prices for differentiated goods. At any given theater, one price is charged for all movies, seven days a week, 365 days a year. This pricing model is puzzling in light of the potential profitability of prices that vary with demand characteristics. Another unique aspect of the motion-picture industry is the legal regime that imposes certain constraints on vertical arrangements between distributors and retailers (exhibitors) and attempts to facilitate competitive bidding for films. We explore the justifications for uniform pricing in the industry and show their limitations. We conclude that exhibitors could increase profits by engaging in variable pricing and that they could do so more easily if the legal constraints on vertical arrangements are lifted.     

Bypassing rural hospitals for obstetrics care

We use data from 1983 and 1988 on hospital use in Alabama to examine the decisions of rural pregnant women to bypass the nearest rural hospital providing obstetric services and seek care elsewhere. The proportion of women who made the decision to bypass the nearest rural hospital increased from 40 percent to 45 percent between 1983 and 1988, while the proportion who traveled to metropolitan areas increased from 41 percent to 68 percent. Women with resources appear to choose longer travel distances in order to use hospitals with high birth volumes and high-risk infant services, but women from counties with large Medicaid populations also more frequently bypassed nearby hospitals.     

Corporate reorganization: the last gasp or last clear chance for the tax-exempt, nonprofit hospital?

The current revolution in health care organization and financing, increased competition, and a retrenching of industry from its commitments to expansion of health care benefits challenge the nonprofit hospital's existence as a viable entity. Hospital governing boards and administrators have turned to corporate reorganization in order to maintain their financial position and to continue to serve their communities. This Article examines the not-for-profit concept and the problems facing nonprofit hospitals. It reviews the pros and cons of reorganization and the for-profit/nonprofit controversy. It questions whether the hybridization of the hospital results in a stronger or weaker species and discusses the possible effects of the newly structured entity on the quality and delivery of health care. Finally, the Article suggests that the nonprofit hospital may survive only by a continued commitment to societal and communal values, to service rather than to profit; that this commitment is adequate justificaton for the preservation of the nonprofit system, and its preservation will reinforce and strengthen the concept.     

The Medicare Cost Report and the limits of hospital accountability: improving financial accounting data

Health policy makers, legislators, providers, payers, and a broad range of other players in the health care market routinely seek information on hospital financial performance. Yet the data at their disposal are limited, especially since hospitals' audited financial statements--the "gold standard" in hospital financial reporting--are not publicly available in many states. As a result, the Medicare Cost Report (MCR), filed annually by most U.S. hospitals in order to receive payment for treating Medicare patients, has become the primary public source of hospital financial information. However, financial accounting elements in the MCR are unreliable, poorly defined, and lacking in critical detail. Comparative analyses of MCRs and matched, audited financial statements reveal long-standing problems with the MCR's data, including major differences in reported profits; variations in the reporting of both revenues and expenses; an absence of relevant details, such as charity care, bad debt, operating versus nonoperating income, and affiliate transactions; an inconsistent classification of changes in net assets; and a failure to provide cash flow statements. Because of these problems, MCR financial data give only a limited and often inaccurate picture of the financial position of hospitals. Audited financial statements provide a more complete perspective, enabling analysts to address important questions left unanswered by the MCR data. Regulatory action is needed to create a national database of financial information based upon audited statements.     

Medicare program; changes to the hospital inpatient prospective payment systems and fiscal year 2003 rates. Final rule

We are revising the Medicare acute care hospital inpatient prospective payment systems for operating and capital costs to implement changes arising from our continuing experience with these systems. In addition, in the Addendum to this final rule, we describe the changes to the amounts and factors used to determine the rates for Medicare hospital inpatient services for operating costs and capital-related costs. These changes are applicable to discharges occurring on or after October 1, 2002. We also are setting forth rate-of-increase limits as well as policy changes for hospitals and hospital units excluded from the acute care hospital inpatient prospective payment systems. In addition, we are setting forth changes to other hospital payment policies, which include policies governing: Payments to hospitals for the direct and indirect costs of graduate medical education; pass-through payments for the services of nonphysician anesthetists in some rural hospitals; clinical requirements for swing-bed services in critical access hospitals (CAHs); and requirements and responsibilities related to provider-based entities.     

Medicare program; changes to the hospital inpatient prospective payment systems and fiscal year 2004 rates. Final rule

We are revising the Medicare hospital inpatient prospective payment systems (IPPS) for operating and capital costs to implement changes arising from our continuing experience with these systems. In addition, in the Addendum to this final rule, we are describing changes to the amounts and factors used to determine the rates for Medicare hospital inpatient services for operating costs and capital-related costs. These changes are applicable to discharges occurring on or after October 1, 2003. We also are setting forth rate-of-increase limits as well as policy changes for hospitals and hospital units excluded from the IPPS that are paid on a cost basis subject to these limits. Among other changes that we are making are: changes to the classification of cases to the diagnosis-related groups (DRGS); changes to the long-term care (LTC)-DRGs and relative weights; the introduction of updated wage data used to compute the wage index; the approval of new technologies for add-on payments; changes to the policies governing postacute care transfers; payments to hospitals for the direct and indirect costs of graduate medical education; pass-through payments for nursing and allied health education programs; determination of hospital beds and patient days for payment adjustment purposes; and payments to critical access hospitals (CAHs).