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Measuring Hospital Efficiency

May 20, 2012 in Hospitals, Medicare, P4P, Quality | No comments

Medicare recently released the Medicare Spending per Beneficiary (MSPB) measure on Hospital Compare. This measure includes all payments to doctors, hospitals or other facilities for services provided to a patient during the three days before the hospital stay, during the stay, and during the 30 days after discharge from the hospital. Kaiser Health news provides an analysis of this measure and also provides an interactive graph of state level efficiency and a list of hospital MSPB scores.

The Kaiser Health News article notes that:

“Patients treated at most or all hospitals in Las Vegas, Fort Lauderdale, Newark, Miami, Los Angeles and Orange County, Calif., tended to cost more than the national median, which is $17,988. Patients treated at most or all hospitals in Anchorage, Des Moines, Honolulu, Minneapolis and Portland, Ore., tended to cost Medicare less.”

The article also recaps the opinions of a number of industry and policy thought leaders.

Jennifer Faerberg, director of health care affairs at the Association of American Medical Colleges stated that differences in the MSPB measure across hospitals is primary due to how well hospitals  can control post-acute costs.  This is generally true. The MSPB measure controls for the type of admission (i.e., MS-DRG) of the index admission.  Thus, differences in the MSPB measure are due principally to differences in post-acute spending and the frequency with which the patient is readmitted to the hospital within the 30 days after the initial hospitalization.

Some policy experts were critical of the MSPB measure:

Nancy Foster, a vice president at the American Hospital Association, said the data do not answer key questions: Did the patients that got more services fare better than others? Could the patients that cost Medicare less actually have benefitted from more care? ”What we don’t know is if those additional investments yield differences in outcomes,” Foster said.

Foster makes a good point; the MSPB measure should not be analyzed in isolation.  CMS does not only measures hospital efficiency, but also includes a number of hospital quality measures.

Elliott Fisher, one of the main researchers from the Dartmouth Atlas, questioned the practical usefulness of the new information.  “As a hospital administrator I would go, how does this help me?” he said. “We just don’t know whether a lot of specialists are running through the hospital doing everything they can to every patient who is horizontal, or whether they’re discharging every patient to a rehab facility. Those are two very different causes of high costs.”

However, CMS did distribute a “hospital specific report” that detailed where the average spending went (e.g., inpatient, skilled nursing facility, home health physician) in the periods before, during and after the index hospital admission.  Each of these quantities is compared to the state and national average spending levels for each type of service.

Disclaimer: The Healthcare Economist worked with CMS and a team at Acumen to develop the MSPB measure.

 

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When less is more

May 10, 2012 in Supply of Medical Services | No comments

Some medical procedures and tests are unnecessary.  Others can even be harmful to patients.  In an effort to reduce the frequency of these services, Consumer Reports is teaming with the ABIM Foundation and nine medical specialty societies to develop evidence-based lists of tests and procedures for patients and physicians to question as part of Choosing Wisely.  According to their website:

“The goal of this campaign is to help physicians, patients and other health care stakeholders think and talk about overuse of health care resources in the United States. The campaign is part of the ABIM Foundation’s goal of promoting wise choices bWy clinicians in order to improve health care outcomes, provide patient-centered care that avoids unnecessary and even harmful interventions, and reduce the rapidly-expanding costs of the health care system.”

Why would a medical society agree to identify care that is unnecessary?  Some potential reasons, some more cynical than others:

  • Physicians care about patients
  • Physicians want to maintain their reputation as nearly above reproach.  By identifying unnecessary services, doctors will be less susceptible to criticism that they are profit-driven,
  • By creating of list of procedures that should not be done, physicians may be implicitly indicating that the remaining procedures not on the list are on average beneficial to patients;
  • Physicians may place low-margin unnecessary tests on the list, but leave high-margin unnecessary tests off the list.

Most of the current recommendations are very obvious (e.g., don’t give a stress test to people without symptoms, don’t conduct imaging tests for patients with general headaches.   Nevertheless, preventing unnecessary tests can not only help reduce cost, but it can improve patient health.

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Does Public Reporting Affect Patient Behavior?

May 7, 2012 in Nursing Home, Nursing Homes, Quality | No comments

A number of studies have already examined this question.

  • Baker et al. (2003) examined the effectiveness of a public reporting effort in hospitals in Ohio, finding little relationship between a hospital’s report card ranking and changes in its market share.
  • Cutler et al. (2004) examined the effects of reporting quality information about cardiac surgery on hospital volume, finding that being identified as a high-mortality hospital was associated with a decline in the number of cardiac surgery patients at that hospital in the period following the designation.
  • Dafny and Dranove (2008) examine the influence of Medicare HMO report cards…showing that highly ranked plans were gaining market share prior to the report cards’ release but that the report cards led to further gains in market share for high-scoring plans.
  • Chernew et al. (2008) use a Bayesian learning model to estimate enrollees’ general assessment of plan quality prior to the release of report cards and the changes in these assessments over time. They find that the addition of publicly reported plan information has a small incremental effect.

A more recent study by Werner et al. (2012) examines whether Medicare’s Nursing Home Compare website affects consumer decisions. Nursing Home Compare evaluates nursing homes using a variety of factors including: 1) whether they passed inspections, 2) structural measures such as staffing ratios, 3) quality measures reported on MDS assessments.

The authors find “a very small (though statistically significant) demand response to public reporting.”  Skilled nursing facility (SNF) market share experienced a 0.1% increase in market share in cases where the facility increased its reported quality of treating patient pain from the 25th percentile SNF to the 75th percentile SNF.

Werner et al. note that this small economic response implies that SNFs are unlikely to invest in quality improvement since improving quality will not increase market share and improve profits.

One shortcoming of the study is that it only focuses on SNFs.  Since Medicare uses SNFs for shorter term post-acute care, the study cannot identify changing consumer responses for long-term nursing stays.  Because the time the patient spends in long-term nursing homes is typically much longer than SNFs and because patients typically have more time to review their long-term nursing home options than would be the case when they enter SNFs, it is more likely that a consumer response would be observed in the long-term nursing home setting.

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Medicare Spending per Beneficiary

April 30, 2012 in Hospitals, Medicaid/Medicare, Medicare, My Papers, P4P, Quality | 1 comment

Medicare’s Hospital Compare website evaluates hospital quality.  One of the most recent measures to be added to Hospital Compare is a measure of efficiency.  The measure calculates a price-standardized, case-mix adjusted measure of spending during period before, during and after a hospital admission. The Healthcare Economist (Jason Shafrin) and a team at Acumen (including Tom MaCurdy, Sajid Zaidi, Elen Shrestha, and David Pham) worked closely with CMS to develop this measure.  Additional information on this measure is available here or see the results for San Francisco General Hospital here.

“The Spending per Hospital Patient with Medicare measure shows whether Medicare spends more, less, or about the same per Medicare patient treated in a specific hospital, compared to how much Medicare spends per patient nationally. This measure includes any Medicare Part A and Part B payments made for services provided to a patient during the 3 days prior to the hospital stay, during the stay, and during the 30 days after discharge from the hospital.

This result is a ratio calculated by dividing the amount Medicare spends per patient for an episode of care initiated at this hospital by the median (or middle) amount Medicare spent per patient nationally.

A result of 1 means that Medicare spends ABOUT THE SAME amount per patient for an episode of care initiated at this hospital as it does per hospital patient nationally.

A result that is more than 1 means that Medicare spends MORE per patient for an episode of care initiated at this hospital than it does per hospital patient nationally.

A result that is less than 1 means that Medicare spends LESS per patient for an episode of care initiated at this hospital than it does per hospital patient nationally.

Lower numbers are better.“

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The Decline of Mental Hospitals, 1950s

April 27, 2012 in Mental Health, Mental Illness, Nursing Home, Nursing Homes | No comments

The movement of mental health care from mental hospitals to treatment in outpatient settings and nursing homes  began in the 1950s.  Here is how it happened.

“The field of medicine where the ‘rediscovery of community’ found an immediately welcome reception was mental health services.  A movement away from mental hospitals had already begun in the mid-1950s.  The national census of mental hospitals declined from a peak of 634,000 in 1954 to 579,000 by 1963.  The predominant, though contested, explanation for the drop is that the discover and introduction of major tranquilizers (e.g., Thorazine) was the decisive event.  Patients who were previously hospitalized could now be safely treated, or at least more safely ignored, on an outpatient basis.  Another interpretation points to the adoption by Congress in 1956 of amendments to Social Security that provided greater aid to states to support the aged in nursing homes. Mental hospitals had been filled with unwanted older people suffering only from a harmless senility.  By transferring such patients from mental hospitals to nursing homes, the states could transfer part of the cost of upkeep to the federal government.  Probably both drugs and nursing homes had some effect on the decline of mental hospitalization.”

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Why is end-of-life spending so high?

April 25, 2012 in Hospitals, International Health Care Systems | 3 comments

The answer is because using more intensive services does reduce mortality.

This is the finding of a recent JAMA paper. After controlling for patient case mix, the authors examine variation in hospital spending in the last year of a patient’s life. The authors note that “Higher-spending hospitals differed in many ways, such as greater use of evidence-based care, skilled nursing and critical care staff, more intensive inpatient specialist services, and high technology, all of which are more expensive.” Higher spending hospitals (on a per patient basis) tend to be hospitals with a larger volume of patients. They are also more likely to “be located in urban areas; be associated with regional cancer centers; have on-site computed tomography and magnetic resonance imaging scanners, cardiac catheterization laboratories, and cardiac surgery capability; and be early adopters of critical care response teams.”

Higher spending hospitals had overall reduced mortality rates for four disease considered. “In the highest- vs lowest-spending hospitals, respectively, the age- and sex-adjusted 30-day mortality rate was 12.7% vs 12.8% for AMI, 10.2% vs 12.4% for CHF, 7.7% vs 9.7% for hip fracture, and 3.3% vs 3.9% for colon cancer.”

One reason for these differences could be that high-spending areas could be located in richer areas where mortality rates are lower for a variety of reasons. Although unobserved heterogeneity in patient case mix is a problem with any study, the authors do stratify their results based on neighborhood income and find similar results.

The relevance of this study to the United States, however, is hard to determine. Although high spending hospitals decrease mortality in Canada, almost all hospitals in the U.S. would be considered high spending by Canadian standards. Thus, it is unclear that marginal returns to additional spending in the U.S. would be similar to what was observed in this study. In fact, studies in the United States by Barnato et al. and Goodman et al. show “…a positive association between spending and outcomes among low-intensity hospitals or regions but no association at average or higher intensity levels.”
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Do safety net hospitals provide care strategically?

April 23, 2012 in Health Insurance, Hospitals, Medicaid | No comments

It is widely known that safety net hospitals provide less intensive care than hospitals whose patient base is mostly commercially-insured.  One question is whether safety net hospitals discriminate the care provided based on their patients insurance status.  In other words, do commerically insured individuals who visit safety net hospitals receive more care than patients treated at these same hospitals with no insurnce or who are covered by Medicaid?

Based on data from Virginia looking at surgery wait times and rates of breast re-construction surgery, the answer appears to be ‘no.’  A 2012 study by Bradley and co-authors finds the following:

“There is little evidence to suggest that safety net hospitals attenuate treatment differences between insurance and racial groups. The time between diagnosis and surgery was longer in safety net hospitals for all patients, regardless of insurance source or race. Perhaps safety net hospitals are operating at capacity and are unable to schedule surgeries in a timely manner. If this is the case, their resources may be further stretched following the passage of the PPACA. Alternatively, as these hospitals are teaching hospitals, they may perform additional diagnostic tests prior to scheduling surgery or physicians who treat low-income patients may have a slower referral process.”

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Home Births: Feminists vs. OB/GYNs

April 20, 2012 in Licensure, Nonphysician Clinicians, Regulation | No comments

Why aren’t physicians more supportive of home births and midwifery?  The answer is that it eats into their market share and reduces their income.

“[In the 1970s] feminists argued that medical care needed to be demystified and women’s lives demedicalized.  They maintained that childbirth was not a disease and normal deliveries did not require hospitalization and the supervision of an obsterician.

The conflict over home birth proved to be one of the most bitter between the medical profession and the women’s movement.  While no state forbade home birth, the American College of Obstetricians and Gynecologists actively discouraged it as unconscionably risky.  Doctors who participated in home births by offering backup in emergencies were threatened with loss of hospital privileges and even their medical licenses.  Midwives in California were prosecuted for practicing medicine without a license.”

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Providers for Underserved Populations: RHC and FQHC

April 16, 2012 in Medicaid, Medicare, Supply of Medical Services | No comments

What is an RHC? An FQHC? Using a research from Health Resources and Services Administration (HRSA), this post provides the answer.

Rural Health Clinic (RHC)

The Rural Health Clinics Act (P.L. 95-210) was passed by Congress and signed into law by President Carter in 1977. The goal of this Act was twofold. First, it encouraged the utilization of PAs and NPs by providing reimbursement for services these health professionals provided to Medicare and Medicaid patients, even in the absence of a full- time physician. Second, it created a cost-based reimbursement mechanism for services when provided at clinics located in underserved rural areas.

Because of subsequent changes in the Medicare law authorizing Medicare Part B coverage for PAs and NPs in all practice settings, not just RHCs, the original incentive for utilizing PAs and NPs was diminished. However, because an RHC gets reimbursed the same amount from Medicare and Medicaid regardless of whether the patient is seen by a mid-level provider (MLP) such as a PA, NP, CMN, or physician, the facility continues to have a strong incentive to utilize these practitioners whenever it is clinically appropriate.

There are significant differences between the way Medicare pays RHCs and how Medicaid does it.  Medicare reimburses RHCs for “core services” on the basis of an All Inclusive Reimbursement Rate (AIRR) reflecting the cost of the services.  Using cost report submissions from RHCs, Medicare calculates the AIRR as the total RHC allowable costs divided by the number of RHC visits.  In 2011, the reimbursement rate cap was $78.07 for RHCs.  Medicare pays 80 percent of the AIRR and the patient is responsible for 20 percent.

Although Medicaid paid RHCs on a cost-of-service basis before 2000, the Benefits Improvement and Protection Act of 2000 (BIPA) now permits Medicaid now pays RHCs using a prospective payment system (PPS).  The PPS methodology and payment rates vary by State.  For instance, some State Medicaid plans pay for other ambulatory and dental services in addition to RHC core services.

Federally-Qualified Health Center (FQHC)

The term “Federally Qualified Health Center,” or FQHC, refers to three different types of clinics:

  • Health Centers (HCs) including Community Health Centers (CHCs), Migrant Health Centers (MHCs), Health Care for the Homeless Health Centers (HCHs), and Public Housing Primary Care Centers (PHPCs) that are funded under Section 330 of the Public Health Service (PHS) Act,
  • FQHC “Look-Alikes,” or FQHCLAs, that have been identified by HRSA and certified by CMS as meeting the definition of “Health Center” under Section 330 of the PHS Act, although they do not receive grant funding under Section 330; and
  • Outpatient health programs/facilities operated by tribal organizations or urban Indian organizations.

CMS pays FQHCs similarly to the way it pays RHCs.  Medicare pays RHCs based on estimated cost (i.e., AIRR=Total Allowable Cost/FQHC Visits), and Medicaid pays FWHCs using a PPS methodology, based on the historical reasonable costs of the center.  The Medicare reimbursement rate cap for FQHCs is higher than for RHCs.  In 2011, urban FQHCs had a reimbursement rate cap of $126.22 and rural FQHCs had a reimbursement rate cap of $109.24.

It is possible for a practice to be certified as both an RHC and an FQHC, although only one payer status is available for either Medicare or Medicaid. The most likely option for dual certification will be RHC status for Medicare and FQHC status for Medicaid.

A summary of the differences between RHCs and FQHC can be found here.
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Physician Influence on Federal Health Spending, 1950s

April 9, 2012 in Books, Licensure, Physician Compensation, Supply of Medical Services | No comments

The 1950s was a time of unprecedented technological advances in the science of medical care.  In 1955, epidemiologists at the University of Michigan developed a polio vaccine.  These advances lead the federal government to increase funding for research.  Between 1955 and 1960, Congress increased the budget of the National Institutes of Health (NIH) from $81 million to $400 million.  Physicians did not support increased funding for all aspects of medical care, particularly those what would increase competition.

“More money for research met no objections from the AMA.  However, the story of aid to medical education was different, and it is worth recalling the contrast.  In 1949 Congress was close to approving a five-year program of grants and scholarships for medical schools to increase the nation’s supply of physicians.  A bill had passed the Senate and was reported out of House committee when it hit a small snag.  Yet it seemed likely to pass the next year.  The House of Delegates of the AMA approved the measure in December 1949.  However, two months later, concerned about setting dangerous precedents, the AMA board reversed its position, and the bill died in Congress.  Despite wide support from other groups, aid to medical education was blocked throughout the 1950s.”

Although physicians did not support more funds for medical education, medical schools grew tremendously during this period.

“The infusion of money into research and training programs created new opportunities in–and for–medical schools.  During the 1940s, the average income of medical schools tripled form $500,000 to $1.5 million a year; by 1958-59 the average schools income was up to $3.7 million and ten year later to $15 million.”  Medical schools became sprawling, complex organizations that now saw their missions as three-fold: research, education, and patient care (usually in that order).”

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