'Competition' among employers offering health insurance.

Most employees contribute towards the cost of employer-sponsored insurance, despite tax laws that favor zero contributions. Contribution levels vary markedly across firms, and the average contribution (as a percentage of the premium) has increased over time. We offer a novel explanation for these facts: employers raise contribution levels to encourage their employees to obtain coverage from their spouses' employer. We develop a model to show how the employee contribution required by a given firm depends on characteristics of the firm and its work force, and find empirical support for many of the model's predictions.

Assessing the impact of total quality management and organizational culture on multiple outcomes of care for coronary artery bypass graft surgery patients.

OBJECTIVES: To assess the impact of total quality management (TQM) and organizational culture on a comprehensive set of endpoints of care for coronary artery bypass graft surgery (CABG) patients, including risk-adjusted adverse outcomes, clinical efficiency, patient satisfaction, functional health status, and cost of care. METHODS: Prospective cohort study of 3,045 eligible CABG patients from 16 hospitals using risk-adjusted clinical outcomes, functional health status, patient satisfaction, and cost measures. Implementation of TQM was measured by a previously validated instrument based on the Baldridge national quality award criteria. Organizational culture was measured by a previously validated 20-item instrument. Generalized estimating equations were used to control for potential selection bias, repeated measures, and intraclass correlation. RESULTS: A 2- to 4-fold difference in all major clinical CABG care endpoints was observed among the 16 hospitals, but little of this variation was associated with TQM or organizational culture. Patients receiving CABG from hospitals with high TQM scores were more satisfied with their nursing care (P = 0.005) but were more likely to have lengths of stay >10 days (P = 0.0003). A supportive group culture was associated with shorter postoperative intubation times (P = 0.01) but longer operating room times (P = 0.004). A supportive group culture was also associated with higher patient physical (P = 0.005) and mental (P = 0.01) functional health status scores 6 months after CABG. CONCLUSIONS: There was little effect of TQM and organizational culture on multiple endpoints of care for CABG patients. There is a need to examine further the relationships among individual professional skills and motivations, group and microsystem team processes, specifically tailored interventions, and organization-wide culture, decision support processes, and incentives. Assessing the impact of such multifaceted approaches is an important area for further research.

The cost of efforts to improve quality.

BACKGROUND: Virtually all hospitals in the United States report that they engage in efforts to improve quality, such as continuous quality improvement (CQI). Little is known about the costs of these efforts and whether they are associated with improved outcomes or lower patient-care costs. OBJECTIVES: The principal objective of this study was to provide benchmark data on the costs of efforts to improve quality. The authors also attempted to determine if quality improvement expenditures are correlated with outcomes and/or condition-specific hospital costs. METHODS: Detailed information on the cost of quality improvement was obtained from hospitals participating in a broad study of CQI activities. These data were correlated with patient outcomes and condition-specific costs. The subjects were medium to large hospitals throughout the United States. Senior managers provided budgetary information on direct costs of quality improvement, and details about meetings associated with quality improvement. They also provided summary medical bills for all patients undergoing total hip replacement and coronary artery bypass graft surgery. The billing information was combined with data provided by the Health Care Finance Administration to estimate condition-specific costs. Patients were directly surveyed to obtain information about satisfaction and outcomes. RESULTS: There is a wide range of expenditures on quality improvement activities. Meeting costs are a substantial percentage of total costs. Neither total costs nor meeting costs are correlated with condition-specific costs. DISCUSSION: Hospital managers can be expected to insist on evidence that quality improvement expenditures produce tangible benefits. This article provides benchmark estimates of those benefits and a methodology for further research.

The effect of managed care on the incomes of primary care and specialty physicians.

OBJECTIVE: To determine the effects of managed care growth on the incomes of primary care and specialist physicians. DATA SOURCES: Data on physician income and managed care penetration from the American Medical Association, Socioeconomic Monitoring System (SMS) Surveys for 1985 and 1993. We use secondary data from the Area Resource File and U.S. Census publications to construct geographical socioeconomic control variables, and we examine data from the National Residency Matching Program. STUDY DESIGN: Two-stage least squares regressions are estimated to determine the effect of local managed care penetration on specialty-specific physician incomes, while controlling for factors associated with local variation in supply and demand and accounting for the potential endogeneity of managed care penetration. DATA COLLECTION: The SMS survey is an annual telephone survey conducted by the American Medical Association of approximately one percent of nonfederal, post-residency U.S. physicians. Response rates average 60-70 percent, and analysis is weighted to account for nonresponse bias. PRINCIPAL FINDINGS: The incomes of primary care physicians rose most rapidly in states with higher managed care growth, while the income growth of hospital-based specialists was negatively associated with managed care growth. Incomes of medical subspecialists were not significantly affected by managed care growth over this period. These findings are consistent with trends in postgraduate training choices of new physicians. CONCLUSIONS: Evidence is consistent with a relative increase in the demand for primary care physicians and a decline in the demand for some specialists under managed care. Market adjustments have important implications for health policy and physician workforce planning.

Emerging issues in the antitrust definition of healthcare markets.

Managed care has shifted purchasing decisions from patients towards payers. While this shift has been associated with increased price competition in provider markets, we believe that it may enhance the potential for consumer injury from mergers in geographic markets previously considered immune to antitrust concerns (e.g. suburban components of large metropolitan areas). In addition, recent changes also increase concerns about mergers in product submarkets such as tertiary care.

Medicaid-dependent hospitals and their patients: how have they fared?

OBJECTIVE: To examine how private hospitals dependent on Medicaid for a large proportion of their revenues have fared in the face of substantial Medicaid (and more modest Medicare) reimbursement cutbacks and growing managed care. We specifically test three hypotheses regarding Medicaid-dependent hospitals: (1) that they are more likely to "cost-shift" cutbacks to private patients; (2) that they are more likely to cut services for Medicaid (and other) patients; and (3) that they are more likely to close. DATA/STUDY SETTING: Private short-term hospitals in California a state that has experienced a rapid growth in managed care since the early 1980s. Data are drawn from the California Office of Statewide Health Planning and Development (OSHPD) Hospital Disclosure Files for fiscal years 1983 and 1992. STUDY DESIGN: We compare changes in net prices and the provision of services, proxied by list price-adjusted charges, at hospitals for Medicaid, Medicare, and privately insured patients between fiscal years 1983 and 1992 controlling for hospital and market characteristics, case mix, and the proportion of revenues from Medicaid patients. We also examine the probability that a hospital closed during the study period as a function of hospital and market characteristics and payer mix. Although the growth of managed care is hypothesized to reduce opportunities for "cost shifting," it may also confound our analysis of price changes if Medicaid-dependent hospitals are unattractive to managed care patients and respond by offering lower prices to plans. PRINCIPAL FINDINGS: We find no evidence that Medicaid-dependent hospitals raised prices to private patients in response to Medicaid (or Medicare) cutbacks; if anything, they lowered them. However, we find that service levels fell for Medicaid (and Medicare) patients relative to those for privately insured patients and that reductions were greater at Medicaid-dependent hospitals. In addition, our findings suggest that service levels also fell for private patients at Medicaid-dependent hospitals, although reductions were smaller for these patients, suggesting that quality, may be a public good at hospitals. Finally, Medicaid-dependent hospitals were more likely to close. CONCLUSIONS: It been suggested that private hospitals may respond to public reimbursement cutbacks by simply "shifting" costs to privately insured patients, limiting overall cost savings but insulating public patients and hospitals from the effects of cutbacks. We find no evidence of cost shifting. Rather, our results suggest that patients and hospitals bore the brunt of cutbacks; service levels fell at Medicaid-dependent hospitals and such hospitals were more likely to go out of business. This suggests that the consequences of proposed Medicare and Medicaid cutbacks could be severe for public patients and the hospitals that care for them.

Determinants of managed care penetration.

This paper examines factors associated with differences in managed care penetration across geographic areas. Two alternative measures of managed care penetration are considered: the percentage of revenue physicians received from managed care contracts and market survey data on enrollments in managed care plans. Results are similar for both types of measures. Our analysis suggests that demographics, labor market characteristics and supply side variables including the level of concentration in hospital markets, hospital occupancy rates and the practice organization patterns of physicians are all important determinants of managed care penetration.

Economies of scale in non-revenue producing cost centers: implications for hospital mergers.

This paper uses semiparametric methods to estimate the magnitude of economies of scale in 14 non-revenue producing cost centers in hospitals. There are substantial economies of scale in small hospitals, but economies are exhausted in hospitals with over 10,000 discharges annually. In recent hospital mergers challenged by federal antitrust agencies, one or both hospitals had over 10,000 discharges, suggesting that efficiency gains in non-revenue producing cost centers will be small, and could easily be offset by nominal price increases.