Hospital rate regulation: American and foreign comparisons

Rate regulation in the United States usually is inspired by widespread indignant pressures to protect the public against venal exploitation. Rate regulation of American hospitals does not ride such a wave of outrage but is motivated by the need to restrain Medicaid spending and insurance premium increases in some states. Hospital rate regulation in America lacks strong political support, makes many politically prudent concessions to hospitals, and is often threatened by repeal. Since Americans distrust regulators and since individual scrutiny of so many hospitals is burdensome and contentious, they often seek automatic formulae that will produce equitable results by rational calculation. In contrast, rate regulation in Europe is a method of refereeing between hospitals and alert third parties. Hospitals' prospective budgets are always scrutinized by regulators. Guidelines are transmitted by government to link public policy to hospital payment, and the regulators apply the guidelines to each hospital's individual situation. The system results in less contention and more stability in European than in American regulation. Certain features of European hospital practice have kept hospital costs high, but the regulators are now reducing annual increases in costs below America's. In order to reduce cost increases further, Europe is moving toward global budgeting and public grants of hospitals' operating costs, instead of regulation of unit rates. However, regulators may still be essential to scrutinize hospital prospective budgets and to investigate the merits of the claims by individual establishments.     

Politics and economics of hospital cost containment

Voluntary and regulatory efforts toward hospital cost-containment have accelerated with rapid increases in those costs and under pressures of national health insurance. Possible causes of hospital cost inflation are examined in the context of market analysis and with reference to the nature of hospitals as institutions facing special combinations of economic and political conditions and pressures. Some details of voluntary experiments and state regulatory efforts are examined in order to assess the elements of experience to date and their relationships to causes of hospital cost inflation. Federal proposals for a regulatory cap on costs are also discussed along with a view of how such proposals are related to probable causes of hospital cost inflation and of the relevance of other experience.     

Health insurance without provider influence: the limits of cost containment

In our previous paper, we showed that market forces can play a significant role in controlling health care costs and that a considerable amount of cost containment effort was pursued by third-party insurers in Oregon in the 1930s and 1940s. Although physicians were able to thwart this cost-control effort, a 1986 Supreme Court decision, FTC v. Indiana Federation of Dentists, found that a boycott of insurers by dentists violated Section 5 of the Federal Trade Commission Act. Further investigation of recent developments, including the recent Wickline v. California decision, indicates that the primary barriers to cost containment today are not obstructive tactics by providers or provider-controlled health insurance plans. Rather, the primary barriers are increases in the development and diffusion of new technology and society's apparent preference for paying for new tests and procedures regardless of economic efficiency.     

Personnel leadership in action: doing something about health care cost containment

It's no secret that health care costs are skyrocketing and will continue to do so unless business, particularly personnel professionals, takes responsibility for containing them. This month, we present a panel report whose participants--ranging from the corporate manager of employee benefits at TRW to the director of public relations at Blue Cross Of Milwaukee--are taking concrete action to improve employee health and company expenses.     

Power and cost containment in a Danish public hospital

The assumption that hospital decision-making is hierarchical in character underpins the policy formulation process in public as well as pluralist national health care systems. This article's analysis of decision-making in a Danish public hospital reinforces the contrary assertion: that effective authority in acute-care hospitals rests in an amorphous power relationship among the hospital's several occupational groups, in which physicians clearly have the upper hand. After a brief introduction to this Danish hospital, the article develops a detailed portrait of its informal power structure and of the different occupational groups' permanent power-maximizing strategies. Subsequently, the article assesses the impact of these strategies upon two recent efforts to contain the hospital's costs: a decision to close an expensive specialty clinic, and an attempt to shrink the hospital's size by transferring less sick elderly patients to a newly created rehabilitation facility. The study's findings suggest that efforts to impose hospital cost containment by exclusively political means are unlikely to succeed.     

The impact of prospective payment: a multi-dimensional analysis of New Jersey's SHARE program

The SHARE program, which set per diem prospective rates for New Jersey hospitals during the period 1975-1982, is evaluated. Analysis suggests that this program did contain hospital cost increase. However, the program threatened the viability of most inner-city hospitals. Indirect evidence suggests that there was cost-shifting in response to this program, which regulated payment for only Blue Cross and Medicaid patients. Structural features of this program and its successor, the New Jersey DRG program, are analyzed; and implications for the Medicare prospective payment system are examined.