Calculating the costs of training in primary care.

The costs of postgraduate medical education remain a relevant topic for educators and managers as well as for the payors of medical care. Historically, the pervasive problem has been that of identifying education costs in a program that jointly produces patient services and research as well as training. This problem is often approached by an accounting "allocation" of program costs to education. The previous literature on calculating the costs of medical education is reviewed in this paper and the theory related to joint product costing presented as an alternative to the accounting approach. A discussion of the issue centered around an example selected from a teaching hospital outpatient practice is presented.

Toward strategies for cost containment in surgical patients.

The University of Rochester, Department of Surgery, in response to an experimental community-wide limit on hospital budgets, studied high-cost general surgical patients as a potential source of leverage for containment of hospital costs. It was found that a small number of patients impact significantly on hospital costs. In 1980, 3935 patients at Strong Memorial Hospital (SMH) had at least one contact with a general surgical patient care or intensive care unit; 261 patients (6.6%) had total 1980 charges of more than $20,000 each. They contributed 32% of the total of both general surgical charges and patient days. A subset of 2021 patients was selected to represent more precisely the general surgical patient. The 85 high-cost patients (4.2%) of this subset were chosen for intensive study. These patients generated a significant and disproportionate per cent of total (2021) general surgical charges (26.8%) and hospital days (27.6%). Average total charges were more than 8 times those of the complementary general surgical subset (1936). Nineteen of the 85 patients (22.3%) died in the hospital and 42 patients (49.4%) were dead within 2 1/2 years. Forty patients (of the 85) were then further identified as "complex", based on multiple, usually unrelated, illnesses and multiple annual admissions. Tending to be elderly with poor prognoses, 60% of them had died by April 1983. The major criterion of complexity was the lack of a well-focused medical problem; the cure for one problem simply relinquished primacy to another. A parallel study of hospital ancillary procedures disclosed a similar high-cost pattern. Of approximately 4000 ancillary procedures, 100 (2.5%) had annual charges of $100,000 or over, accounting for two-thirds of total 1980 ancillary charges. Roughly 20% of a single patient's ordered procedures accounted for 80% of the patient's ancillary charges, thus allowing concentrated study of a relatively small number of charges. Means for cost containment may be applied logically to the high-cost patient and particularly toward the complex patient. The complex patient is especially suited for consideration, since it is postulated that these patients are endemic to all general hospitals and to all clinical services. Strategies to be developed should include: 1) a managerial system in which physicians have an incentive to contain costs, 2) an online data system, 3) an accurate, efficient way to identify prospective high-cost and complex patients and, 4) awareness by physicians, patients, and society that less expensive modes of diagnosis and therapy are an appropriate response to rationed health resources.

Marginal ambulatory teaching cost under varying levels of service utilization.

The ambulatory component of residency training jointly produces two products, namely, training and patient services. In costing educational programs of this type, two approaches are frequently taken. The first considers the total costs of the educational program, including training and patient services. These costs are usually constructed from historical accounting records. The second approach attempts to cost the joint products separately, based upon estimates of future changes in program costs, if the product in question is added to or removed from the program. The second approach relates to typical decisions facing the managers of medical centers and practices used for teaching purposes. This article reports such a study of costs in a primary-care residency training program in a hospital outpatient setting. The costs of the product, i.e., on-the-job training, are evaluated using a replacement-cost concept under different levels of patient services. The results show that the cost of the product, training, is small at full clinical utilization and is sensitive to changes in the volume of services provided.

A simplified method for approximation of shortages of rural physicians.

The distribution of physicians can be mapped and shortage areas and the number of physicians needed in them can be determined by use of the simple, inexpensive method described. However, the limitations of the methodology must be borne in mind. One should visualize the physician shortage as only a rough indication of the need for primary health care services. More detailed analysis of each area may be required before a new service is actually established, for example, developing a community profile of the planned service area (age sex mix, income, education, race, occupation, and so on), surveying service-level expectation in the community, or studying patients' use of primary care providers in neighboring areas. Even more important may be the selection among a number of possible choices of service alternatives, such as satellite practices, use of physician's assistants or nurse practitioners, or group practices. Estimates based on simplified data and approximations are useful in leading planners to areas of probable undersupply and in helping them to avoid the problems of oversupply. These estimates identify target areas that appear to have physician shortages and point out where more refined analysis should be concentrated.

Inpatient hospital utilization in three prepaid comprehensive health care plans compared with a regular Blue Cross plan.

The evidence is substantial that comprehensive, HMO-type prepayment plans can significiantly reduce hospitalization rates. Yet it remains unclear which factors contribute to this phenomenon. This study focuses on organizational characteristics of four plans with different hospitalization experiences. Regular medical staff review and frequent use of second opinions and economies of scale achieved by providing care at one well-equipped, large health center appear to have the largest impact. However, such organizational advantages can easily be wiped out by adverse self-selection of patients during open-enrollment periods. Evidence of selection based on predictable high obstetrical and newborn care costs is presented.

Who chooses prepaid medical care: Survey results from two marketings of three new prepayment plans.

Employees joining or not joining three newly marketed prepayment plans were surveyed during the first marketing period and during another open enrollment period 18 months later. In the 1973 survey the respondents were 149 subscribers (family contracts covering 568 persons) to the new plans and 224 nonjoiners (a total of 802 persons in their families)--all employees of Rochester's largest industry. In the 1975 survey the respondents were employees of several companies. They included 326 joiner families (1,101 persons) and 145 nonjoiner families (483 persons). There were no significant differences in previous out-of-pocket health expenditures between joiners and nonjoiners. Their self-reported health ratings did not differ; disability over the last 2 weeks was about the same. Physician utilization rates and inpatient rates were similar, except for the spouses of subscribers to one plan. However, the joiners were younger, had lived in Rochester for a shorter period, and had made less use of physicians in private practice. The three prepayment plans appealed to different population groups. The Network joiners were young, low-income families, mostly from the city. The Group Health joiners were young families with few children who especially valued availability, accessibility, and comprehensiveness. Health Watch joiners were older couples who preferred to use the traditional avenues to health care.