Do Physicians Cost Shift?

Health Affairs

Volumn 15, Issue 3, 1996, Pages 215-225

  Rice, Thomas ^a   Stearns, Sally ^b,c   DesHarnais, Susan ^b   Pathman, Donald ^c,d   Tai Seale, Ming ^e   Brasure, Michelle ^f  

^a U S DEPARTMENT OF HEALTH AND HUMAN SERVICES   (United States)

^b UNIVERSITY OF NORTH CAROLINA   (United States)

^c Department of Family Medicine

^d Cecil G Sheps Ctr Hlth Serv Res

^e INDIANA UNIVERSITY   (United States)

^f NONE

Author keywords

[No Author keywords available]

Indexed keywords

AGED; ARTICLE; COST; ECONOMICS; EPIDEMIOLOGY; HEALTH ECONOMICS; HEALTH INSURANCE; HUMAN; MEDICAL FEE; MEDICARE; REGRESSION ANALYSIS; REIMBURSEMENT; UNITED STATES;

AGED; COST ALLOCATION; ECONOMICS, MEDICAL; FEES, MEDICAL; HUMANS; INSURANCE, HEALTH; INSURANCE, HEALTH, REIMBURSEMENT; MEDICARE; REGRESSION ANALYSIS; SAMPLING STUDIES; UNITED STATES;

EID: 1542429627     PISSN: 02782715     EISSN: None     Source Type: Journal    
DOI: 10.1377/hlthaff.15.3.215     Document Type: Article

References (20)

1. Prospective Payment Assessment Commission, Optional Hospital Payment Rates, Congressional Report C-92-03 (Washington: ProPAC March 1992).
2. Some of the more academic research on hospital cost shifting occurred some time ago, before the implementation of diagnosis-related groups (DRGs). See, for example, F.A. Sloan and E.R. Becker, "Cross-Subsidies and Payment for Hospital Care " Journal of Health Politics, Policy and Law (Winter 1984): 660-685. Using older studies like these for informing current policy suffers from one major drawback: Because they predated implementation of the DRG system, their findings may not be applicable to the current hospital market. Two recent government studies have attempted to calculate the degree of cost shifting that now exists. See ProPAC, Optional Hospital Payment Rates; and Congressional Budget Office, Responses to Uncompensated Care and Public-Program Controls on Spending: Do Hospitals 'Cost Shift'? (Washington: CBO, May 1993).
3. Some of the more academic research on hospital cost shifting occurred some time ago, before the implementation of diagnosis-related groups (DRGs). See, for example, F.A. Sloan and E.R. Becker, "Cross-Subsidies and Payment for Hospital Care " Journal of Health Politics, Policy and Law (Winter 1984): 660-685. Using older studies like these for informing current policy suffers from one major drawback: Because they predated implementation of the DRG system, their findings may not be applicable to the current hospital market. Two recent government studies have attempted to calculate the degree of cost shifting that now exists. See ProPAC, Optional Hospital Payment Rates; and Congressional Budget Office, Responses to Uncompensated Care and Public-Program Controls on Spending: Do Hospitals 'Cost Shift'? (Washington: CBO, May 1993).
4. Physician Payment Review Commission, Annual Report to Congress, 1995 (Washington: PPRC, 1995).
5. PPRC, Monitoring Access of Medicare Beneficiaries (Washington: PPRC, May 1995).
6. PPRC, Monitoring the Financial Liability of Medicare Beneficiaries (Washington: PPRC, May 1995).
7. We thank Paul Ginsburg for pointing this out to us.
8. T. Rice et al., "Physician Response to Medicare Payment Reductions: Impacts on the Public and Private Sectors," Final Report (Submitted to The Robert Wood Johnson Foundation, September 1994).
9. Ibid. The procedure groups were chosen primarily to facilitate analysis of how Medicare payment reductions affected the volume of services. The criteria used for selecting procedures included the following: (1) They had to be surgical procedures so that they were included in the discharge abstract data that were obtained for a different component of the study; (2) they had to have a clean crosswalk between International Classification of Diseases, Ninth Revision, Clinical Modification (ICD-9-CM) and Current Procedural Terminology (CPT) codes, because the discharge abstracts used in that study did not contain information on CPT codes to which the Medicare payment reductions were applied over the study period; and (3) they had to be defined as "overvalued" by Medicare. Because the procedures selected are a cross-section of overvalued procedures representing eight specialties, we believe that they represent an adequate sample for the analysis conducted in this DataWatch
10. The MEDSTAT data were aggregated to the metropolitan statistical area (MSA) or non-MSA state level. These data were linked to the Medicare data (which were provided at the Medicare charge locality level) by using information on the counties comprising the charge localities. To help ensure cleanliness of the data, we gave MEDSTAT ranges for "valid" reimbursement rates and billed physician charges for each procedure code, by state, by year. During file construction it was determined that the frequency of claims used in constructing the MEDSTAT variables was extremely limited for some areas (that is, only one or two claims are used to construct the "averages") and that there were no private insurance price data available in some areas in which there are Commission on Professional Hospital Activities (CPHA) hospitals. Additional data obtained to check whether the ranges caused excessive elimination of data did not indicate a problem, and the overall averages for the private-pay charges and reimbursements seem to be in line with what would be expected based on the level of Medicare fees. Therefore, missing data were filled in by creating a second set of average private charges and reimbursements based on regional MSA and non-MSA area aggregations.
11. Selected areas contained one or more hospitals that agreed to allow use of their discharge abstracts through agreements with the CPHA. Although the discharge abstracts are not used in this investigation, charge and payment data were obtained only for the areas defined by this set of hospitals.
12. From 1988 through 1990 Medicare fee screens were changed in April rather than on a calendar year basis. Medicare fees were set according to the calendar year beginning in January 1991. All charge and payment variables were deflated to 1988 levels by the physician services component of the Consumer Price Index (CPI). This has no effect on the estimated regression coefficient for the primary independent variable, the Medicare payment rate, since the CPI provides a national rather than a regional adjustment.
13. If the number of available claims was too small to construct a reliable measure of payment for the charge locality, the carrier payment level was used instead.
14. Although we experimented with statistical techniques that are designed to deal explicitly with endogenous independent variables, the data sources available were not sufficient for producing stable results.
15. Because of the limited number of survey respondents who were nurses, we estimated these four categories of wages for urban and rural areas in the nine regions of the country.
16. See Note 8.
17. Ibid.
18. These declines may represent a shift in the mix of procedures within the group (that is, an increase in the relative proportion of less expensive procedures in the group), rather than a decline in real price for any individual procedure.
19. One concern is that when the dependent variable is specified as billed charges, the R-square value is near unity, equaling .970 (compared with .437 for the other specification). This could be caused by the omission of some important independent variables that are correlated with both the private billed charge and the Medicare payment rate; the most likely are those representing the relative expense of different geographic areas. To investigate this further, we used a Ramsey RESET test to look for evidence of omitted variables. Although the test found such evidence for both specifications, it was particularly strong when the dependent variable was defined as billed charges.
20. Rice et al., "Physician Response to Medicare Payment Reductions."