Giving A Buck Or Making A Buck? Donations By Pharmaceutical Manufacturers To Independent Patient Assistance Charities.

The federal Anti-Kickback Statute prohibits biopharmaceutical manufacturers from directly covering Medicare enrollees' out-of-pocket spending for the drugs they manufacture, but manufacturers may donate to independent patient assistance charities and earmark donations for a condition treated by their drugs. To assess whether this law and its associated regulations prevent manufacturers from profiting from their donations, we analyzed drug spending of more than three million Medicare Advantage enrollees in 2010 and 2017, together with data on conditions and drugs covered by these charities. We found that donations by the leading manufacturer of drugs for each condition were often likely to be profitable, even if relatively few patients were induced to use the manufacturer's drugs as a result. This was particularly true among the ten costliest conditions, where the leading manufacturer accounted for 67 percent of sales in 2010 and 89 percent in 2017, on average, indicating that manufacturers could effectively assist in the purchase of their own medications by contributing to condition-specific charities. We conclude that the current regulations or enforcement permit donations that violate the spirit of Medicare's Anti-Kickback Statute.

Endogenous quality investments in the U.S. hospital market.

High and increasing hospital prices could reflect market imperfections, including provider concentration. Yet high prices could also reflect increased willingness to pay by privately insured consumers for clinical and non-clinical quality. In this paper, we explore strategic quality choices where hospitals make quality investments to increase private revenue. We then measure the relationship between potential prices and numerous quality measures including patient satisfaction, hospital processes, risk-adjusted mortality, the revealed preferences of current Medicare patients, technology adoption, physician quality, and ED wait times. We show that across a range of measures quality is correlated with the profitability of the payer mix: hospitals with more potential privately insured patients are of higher quality.

Who cares about a label? The effect of pediatric labeling changes on prescription drug utilization.

Off-label drug use is common, particularly in pediatric populations. In response, legislation requires and/or provides financial incentives for drug manufacturers to perform pediatric clinical trials. Using New Hampshire's all-payer claims database, we examine the impact of subsequent changes to drug labeling on pediatric drug utilization. To separate changes in utilization induced by labeling changes from other temporal factors, we estimate difference-in-differences models that compare utilization trends for pediatric patients to those of adults. We estimate that establishing safety and efficacy increases a drug's market share by (a statistically significant) 2.8 percentage points, whereas failure to do so decreases a drug's market share by (a statistically insignificant) 0.9 percentage points. We then interpret these estimates within the context of public and market incentives to conduct pediatric clinical trials.

Decreases In Readmissions Credited To Medicare's Program To Reduce Hospital Readmissions Have Been Overstated.

Medicare's Hospital Readmissions Reduction Program (HRRP) has been credited with lowering risk-adjusted readmission rates for targeted conditions at general acute care hospitals. However, these reductions appear to be illusory or overstated. This is because a concurrent change in electronic transaction standards allowed hospitals to document a larger number of diagnoses per claim, which had the effect of reducing risk-adjusted patient readmission rates. Prior studies of the HRRP relied upon control groups' having lower baseline readmission rates, which could falsely create the appearance that readmission rates are changing more in the treatment than in the control group. Accounting for the revised standards reduced the decline in risk-adjusted readmission rates for targeted conditions by 48 percent. After further adjusting for differences in pre-HRRP readmission rates across samples, we found that declines for targeted conditions at general acute care hospitals were statistically indistinguishable from declines in two control samples. Either the HRRP had no effect on readmissions, or it led to a systemwide reduction in readmissions that was roughly half as large as prior estimates have suggested.

The effect of hospital acquisitions of physician practices on prices and spending.

During the past decade, U.S. hospitals have acquired a large number of physician practices. For example, from 2007 to 2013, hospitals acquired nearly 10% of the practices in our sample. We find that the prices for the services provided by acquired physicians increase by an average of 14.1% post-acquisition. Nearly half of this increase is attributable to the exploitation of payment rules. Price increases are larger when the acquiring hospital has a larger share of its inpatient market. We find that integration of primary care physicians increases enrollee spending by 4.9%.

Physician Practice Consolidation Driven By Small Acquisitions, So Antitrust Agencies Have Few Tools To Intervene.

The growing concentration of physician markets throughout the United States has been raising antitrust concerns, yet the Department of Justice and the Federal Trade Commission have challenged only a small number of mergers and acquisitions in this field. Using proprietary claims data from states collectively containing more than 12 percent of the US population, we found that 22 percent of physician markets were highly concentrated in 2013, according to federal merger guidelines. Most of the increases in physician practice size and market concentration resulted from numerous small transactions, rather than a few large transactions. Among highly concentrated markets that had increases large enough to raise antitrust concerns, only 28 percent experienced any individual acquisition that would have been presumed to be anticompetitive under federal merger guidelines. Furthermore, most acquisitions were below the dollar thresholds that would have required the parties to report the transaction to antitrust authorities. Under present mechanisms, federal authorities have only limited ability to counteract consolidation in most US physician markets.

Narrow Networks On The Health Insurance Marketplaces: Prevalence, Pricing, And The Cost Of Network Breadth.

Anecdotal reports and systematic research highlight the prevalence of narrow-network plans on the Affordable Care Act's health insurance Marketplaces. At the same time, Marketplace premiums in the period 2014-16 were much lower than projected by the Congressional Budget Office in 2009. Using detailed data on the breadth of both hospital and physician networks, we studied the prevalence of narrow networks and quantified the association between network breadth and premiums. Controlling for many potentially confounding factors, we found that a plan with narrow physician and hospital networks was 16 percent cheaper than a plan with broad networks for both, and that narrowing the breadth of just one type of network was associated with a 6-9 percent decrease in premiums. Narrow-network plans also have a sizable impact on federal outlays, as they depress the premium of the second-lowest-price silver plan, to which subsidy amounts are linked. Holding all else constant, we estimate that federal subsidies would have been 10.8 percent higher in 2014 had Marketplaces required all plans to offer broad provider networks. Narrow networks are a promising source of potential savings for other segments of the commercial insurance market.

The Impact of the ACA's Medicaid Expansion on Hospitals' Uncompensated Care Burden and the Potential Effects of Repeal.

ISSUE: By increasing health insurance coverage, the Affordable Care Act's Medicaid eligibility expansion was also expected to lessen the uncompensated care burden on hospitals. The expansion currently faces an uncertain future. GOAL: To compare the change in hospitals' uncompensated care burden in the 31 states (plus the District of Columbia) that chose to expand Medicaid to the changes in states that did not, and to estimate how these expenses would be affected by repeal or further expansion. METHODS: Analysis of uncompensated care data from Medicare Hospital Cost Reports from 2011 to 2015. FINDINGS AND CONCLUSIONS: Uncompensated care burdens fell sharply in expansion states between 2013 and 2015, from 3.9 percent to 2.3 percent of operating costs. Estimated savings across all hospitals in Medicaid expansion states totaled $6.2 billion. The largest reductions in uncompensated care were found for hospitals in expansion states that care for the highest proportion of low-income and uninsured patients. Legislation that scales back or eliminates Medicaid expansion is likely to expose these safety-net hospitals to large cost increases. Conversely, if the 19 states that chose not to expand Medicaid were to adopt expansion, their uncompensated care costs also would decrease by an estimated $6.2 billion.

Uncompensated Care Decreased At Hospitals In Medicaid Expansion States But Not At Hospitals In Nonexpansion States.

One pillar of the Affordable Care Act (ACA) was its expected impact on the growing burden of uncompensated care costs for the uninsured at hospitals. However, little is known about how this burden changed as a result of the ACA's enactment. We examine how the Affordable Care Act (ACA)'s coverage expansions affected uncompensated care costs at a large, diverse sample of hospitals. We estimate that in states that expanded Medicaid under the ACA, uncompensated care costs decreased from 4.1 percentage points to 3.1 percentage points of operating costs. The reductions in Medicaid expansion states were larger at hospitals that had higher pre-ACA uncompensated care burdens and in markets where we predicted larger gains in coverage through expanded eligibility for Medicaid. Our estimates suggest that uncompensated care costs would have decreased from 5.7 percentage points to 4.0 percentage points of operating costs in nonexpansion states if they had expanded Medicaid. Thus, while the ACA decreased the variation in uncompensated care costs across hospitals within Medicaid expansion states, the difference between expansion and nonexpansion states increased substantially. Policy makers and researchers should consider how the shifting uncompensated care burden affects other hospital decisions as well as the distribution of supplemental public funding to hospitals.

Investment subsidies and the adoption of electronic medical records in hospitals.

In February 2009 the U.S. Congress unexpectedly passed the Health Information Technology for Economic and Clinical Health Act (HITECH). HITECH provides up to $27 billion to promote adoption and appropriate use of Electronic Medical Records (EMR) by hospitals. We measure the extent to which HITECH incentive payments spurred EMR adoption by independent hospitals. Adoption rates for all independent hospitals grew from 48 percent in 2008 to 77 percent by 2011. Absent HITECH incentives, we estimate that the adoption rate would have instead been 67 percent in 2011. When we consider that HITECH funds were available for all hospitals and not just marginal adopters, we estimate that the cost of generating an additional adoption was $48 million. We also estimate that in the absence of HITECH incentives, the 77 percent adoption rate would have been realized by 2013, just 2 years after the date achieved due to HITECH.

The economic downturn and its lingering effects reduced medicare spending growth by $4 billion in 2009-12.

Previous work has found a strong connection between the most recent economic recession and reductions in private health spending. However, the effect of economic downturns on Medicare spending is less clear. In contrast to studies involving earlier time periods, our study found that when the macroeconomy slowed during the Great Recession of 2007-09, so did Medicare spending growth. A small (14 percent) but significant share of the decline in Medicare spending growth from 2009 to 2012 relative to growth from 2004 to 2009 can be attributed to lingering effects of the recession. Absent the economic downturn, Medicare spending would have been $4 billion higher in 2009-12. A major reason for the relatively small impact of the macroeconomy is the relative lack of labor-force participation among people ages sixty-five and older. We estimate that if they had been working at the same rate as the nonelderly before the recession, the effect of the downturn on Medicare spending growth would have been twice as large.

Health spending slowdown is mostly due to economic factors, not structural change in the health care sector.

The source of the recent slowdown in health spending growth remains unclear. We used new and unique data on privately insured people to estimate the effect of the economic slowdown that began in December 2007 on the rate of growth in health spending. By exploiting regional variations in the severity of the slowdown, we determined that the economic slowdown explained approximately 70 percent of the slowdown in health spending growth for the people in our sample. This suggests that the recent decline is not primarily the result of structural changes in the health sector or of components of the Affordable Care Act, and that-absent other changes in the health care system-an economic recovery will result in increased health spending.