Effects of selective contracting on hospital efficiency, costs and accessibility

Health Economics

Volumn 7, Issue 3, 1998, Pages 247-261

  Mobley, Lee Rivers ^a  

^a OAKLAND UNIVERSITY   (United States)

Author keywords

Accessibility; Hospital costs; Hospital efficiency; Selective contracting

Indexed keywords

ARTICLE; HEALTH CARE AVAILABILITY; HEALTH CARE POLICY; HOSPITAL COST; HOSPITAL MANAGEMENT; HUMAN; MEDICAID; PRIORITY JOURNAL; PRODUCTIVITY; UNITED STATES;

CALIFORNIA; CONTRACT SERVICES; COST CONTROL; DATA INTERPRETATION, STATISTICAL; DELIVERY OF HEALTH CARE; ECONOMIC COMPETITION; EFFICIENCY, ORGANIZATIONAL; FINANCIAL MANAGEMENT, HOSPITAL; HEALTH CARE REFORM; HEALTH SERVICES ACCESSIBILITY; HOSPITAL COSTS; HOSPITALS, PUBLIC; HUMANS; MEDICAID; MEDICAL INDIGENCY; UNITED STATES;

EID: 0031982031     PISSN: 10579230     EISSN: None     Source Type: Journal    
DOI: 10.1002/(SICI)1099-1050(199805)7:3<247::AID-HEC319>3.0.CO;2-J     Document Type: Article

References (31)

1. By 1980, many states were experiencing budgetary crises, and Medicaid expenses were the fastest growing budgetary item. Cutbacks in federal funds for state Medicaid programs occurred with the Omnibus Reconciliation Act of 1981 (OBRA) and the Tax Equity and Fiscal Responsibility Act of 1982 (TEFRA). Provisions in OBRA allowed states greater flexibility to innovate with their Medicaid programs in hopes of containing costs, and 30 states altered their programs in 1981. In 1982, 15 states received waivers which allowed them to bypass the historical 'freedom of provider choice' provision for Medicaid enrollees, and 6 states were awarded grants to perform competitive demonstration projects with Medicaid: Christianson, Jon B. and Hillman, Diane G. Health care for the indigent and competitive contracts: the Arizona experience. Ann Arbor: Health Administration Press, 1986.
2. Phelps, Charles. Cross subsidies and charge-shifting in American hospitals. In: Sloan, F.A., Blumstein, J.F. and Perrin, J.M. (eds.). Uncompensated hospital care: rights and responsibilities. Baltimore: Johns Hopkins University Press, 1986.
3. Frech. H.E. III. Preferred provider organizations and health care competition. In: Frech III, H.E. (ed.), Health care in America. San Francisco: Pacific Research Institute for Public Policy, 1988: 353-72.
4. Pauly, Mark V. A primer on competition in medical markets. In: Health care in America, Frech III, H.E. (ed.). San Francisco: Pacific Research Institute for Public Policy, 1988: 27-74.
5. Melnick, Glenn and Zwanziger, Jack. Hospital behavior under competition and cost-containment policies: The California Experience 1980-1985. Journal of the American Medical Association 1988; 260: 2669-2675. Robinson, James and Luft, Harold. Competition, regulation, and hospital costs, 1982-1986. Journal of the American Medical Association 1988; 260: 2676-2681.
6. Melnick, Glenn and Zwanziger, Jack. Hospital behavior under competition and cost-containment policies: The California Experience 1980-1985. Journal of the American Medical Association 1988; 260: 2669-2675. Robinson, James and Luft, Harold. Competition, regulation, and hospital costs, 1982-1986. Journal of the American Medical Association 1988; 260: 2676-2681.
7. Robinson, James C. and Phibbs, C. An evaluation of Medicaid Selective contracting in California. Journal of Health Economics 1989; 4: 437-455.
8. Johns, Lucy. Selective contracting in California. HealthAffairs 1985; 4: 32-48.
9. Taub, J.S. An ailing health system for the poor. California Journal 1987: 427-433.
10. Koyama, Julie K. Financing local government in the post-proposition 13 era: The use and effectiveness of nontaxing revenue sources. Pacific Law Journal 1991; 22: 1333-1369.
11. Brown, Richard E., Valdez, R.B., Morgenstern, H., Bradley, T. and Hafner, C. Californians without Health Insurance: A Report to the California Legislature. Los Angeles (UCLA): California Policy Seminar Technical Assistance Project, 1987. Brown, Richard E., Valdez, R.B., Morgenstern, H., Nourjah, P. and Hafner, C. Changes in Health Insurance Among Californians 1979-1986. Los Angeles (UCLA): California Policy Seminar, 1988.
12. Brown, Richard E., Valdez, R.B., Morgenstern, H., Bradley, T. and Hafner, C. Californians without Health Insurance: A Report to the California Legislature. Los Angeles (UCLA): California Policy Seminar Technical Assistance Project, 1987. Brown, Richard E., Valdez, R.B., Morgenstern, H., Nourjah, P. and Hafner, C. Changes in Health Insurance Among Californians 1979-1986. Los Angeles (UCLA): California Policy Seminar, 1988.
13. Sofaer, Shoshanna. Restrictive reimbursement policies and uncompensated care in California hospitals, 1981-1986. Hospital and Health Services Administration 1990; 35: 189-206.
14. Brown, Richard E. Public Medicine in Crisis: Public Hospitals in California. UC Berkeley: California Policy Seminar, Institute of Governmental Studies Monograph No. 11, 1981.
15. The legislature mandated 9 factors in addition to price, to be taken into consideration by Medicaid in awarding contracts: Brown, Richard, Cousineau, Michael and Price, Walter. Competing for Medi Cal Business: why hospitals did, and did not, get contracts. Inquiry 1985; 22: 237-250. Also Federal law mandates that states take into account volume of care to the poor when establishing payment rates: Andrews, R., Herz, Elicia, Dodds, S. and Ruther, M. Access to hospital care for California and Michigan Medicaid recipients. Health Care Financing Review 1991; 12: 99-104.
16. The legislature mandated 9 factors in addition to price, to be taken into consideration by Medicaid in awarding contracts: Brown, Richard, Cousineau, Michael and Price, Walter. Competing for Medi Cal Business: why hospitals did, and did not, get contracts. Inquiry 1985; 22: 237-250. Also Federal law mandates that states take into account volume of care to the poor when establishing payment rates: Andrews, R., Herz, Elicia, Dodds, S. and Ruther, M. Access to hospital care for California and Michigan Medicaid recipients. Health Care Financing Review 1991; 12: 99-104.
17. The observed price per diem is an estimate of the transaction price, rather than list price (charges), as it is net of all contractual discounts. It is constructed by dividing net Medicaid inpatient revenue by Medicaid inpatient days. Actual bid or transaction prices are not available.
18. Mennemeyer, S. and Olinger, L. Selective contracting in California: its effect on hospital finances. Inquiry 1989; 26: 442-57.
19. In our analysis, we examine the period immediately following implementation of the reforms (1984-1990) in order to employ both Medicaid and MIA discharge data. Robinson and Phibbs (1989) examined change in privately-owned community hospital costs per discharge in California, 1982-1986, a period which spanned the implementation of the Medicaid Reform Act, in 1983. They excluded public hospitals from their analysis due to non-availability of medically indigent adult (MIA) discharge data in 1982, whose omissions were assumed to impact public hospital costs more severely than private hospital costs (Robinson and Phibbs 1989, p. 444). Discharge data for MIAs were not available from the California Office of Statewide Health Planning and Development prior to 1984.
20. This seems reasonable, since the state designated the HFPA as the relevant market in conducting selective contracting bidding among hospitals for Medicaid constituents. Robinson and Phibbs (1989) measured competition using the number of competing hospitals in regions defined from zipcodes of patient origin with significant overlap.
21. Augustyniak, Sue. Some econometric advantages of panel data. In: Five thousand American families: patterns of economic progress. Ann Arbor: University of Michigan Institute for Social Research, 1981: 405-420.
22. Medicare is health care for the elderly. Reform of the Medicare payments system was implemented in 1984, with the Prospective Payment System (PPS), which exerted pressure on hospitals to increase efficiency. Prospective Payment Assessment Commission. Medicare and the American Health Care System: Report to The Congress. Washington US Government Printing Office, 1995.
23. it), and rearranging terms. Note that the 'change in the effect of payer share' is the multiplier attached to the payer share variable in levels at time r, while the 'effect of payer share at time t + 1' is the multiplier attached to the differenced payer share variable (Augustyniak, Ref. 18).
24. This is consistent with a small body of empirical literature which finds that more resources are expended on those who can pay than on those who cannot: Sloan, Frank, Morrisey, Michael and Valvona, Joseph. Hospital care and the 'self-pay' patient. Journal of Health, Politics, Policy and Law 1988; 13: 83-101.
25. Duan, Naihua. Smearing estimate: a non-parametric retransformation method. Journal of the American Statistical Association 1983; 78: 605-610.
26. Distance is calculated 'as the crow flies' from the zipcode centroid of patient origin to the zipcode centroid of the hospital. Zipcode centroids are population-weighted to reflect the center of the population distribution, rather than the geographic center. While actual distance traveled on surface roads would be a more accurate measure, the concentration of both hospitals and poor populations in dense locations does minimize the bias in our approximation.
27. The category 'no charge' exists, but because a significant amount of uncompensated care is bad debt, it is not captured by this category. Similarly, the category 'self-pay' exists, but not all self-paid discharges default on their payment obligation.
28. San Francisco may wind up being mecca for the uninsured. Modern Healthcare October 7, 1996: 104.
29. State looks to Medicaid for health-system relief. AHA News 1996; 32: 5.; Medicaid reform must protect poor, AHA declares. AHA News 1996; 32: 1; California waiver proposal sent to HCFA. AHA News 1996; 32: 6.
30. State looks to Medicaid for health-system relief. AHA News 1996; 32: 5.; Medicaid reform must protect poor, AHA declares. AHA News 1996; 32: 1; California waiver proposal sent to HCFA. AHA News 1996; 32: 6.
31. State looks to Medicaid for health-system relief. AHA News 1996; 32: 5.; Medicaid reform must protect poor, AHA declares. AHA News 1996; 32: 1; California waiver proposal sent to HCFA. AHA News 1996; 32: 6.