Hospitals respond to medicare payment shortfalls by both shifting costs and cutting them, based on market concentration

Health Affairs

Volumn 30, Issue 7, 2011, Pages 1265-1271

  Robinson, James ^a  

^a UNIVERSITY OF CALIFORNIA   (United States)

Author keywords

[No Author keywords available]

Indexed keywords

ACT; ARTICLE; HEALTH CARE COST; HEALTH CARE PLANNING; HEALTH CARE POLICY; HOSPITAL CARE; HUMAN; MAJOR CLINICAL STUDY; MEDICARE; PRIVATE HEALTH INSURANCE; PROFIT; PROSPECTIVE PAYMENT;

COST ALLOCATION; ECONOMIC COMPETITION; FEMALE; FINANCIAL MANAGEMENT, HOSPITAL; HOSPITAL CHARGES; HOSPITAL COSTS; HUMANS; MALE; MARKETING OF HEALTH SERVICES; MEDICARE; UNITED STATES;

EID: 79960284918     PISSN: 02782715     EISSN: 15445208     Source Type: Journal    
DOI: 10.1377/hlthaff.2011.0220     Document Type: Article

References (29)

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21. The Herfindahl-Hirschman Index is constructed by dividing the number of staffed beds for each facility by the total number of beds within the market to obtain each hospital's share. The share of each facility then is squared, and the shares of all hospitals are summed to create an index that potentially ranges from 0 (many competitors, each with a negligible share) to 10,000 (one facility, with 100 percent market share). For ease of interpretation, the index is scaled here so it ranges from a potential low of 0 to a potential high of 100.
22. For hip and knee replacement procedures, coded diagnoses included osteoarthritis, rheumatoid arthritis, aseptic necrosis, and fractures. For lumbar and cervical spine fusion, diagnoses included fracture, spondylolisthesis, and intervertebral disk disorder. For angioplasty, the analysis was limited to patients receiving a drug-eluting stent (as distinct from a bare-metal stent or no stent) and adjusted for the number of stents used in the case. For pacemaker and defibrillator insertion, respectively, the statistical analyses were adjusted for whether the implant included a single or dual chamber and whether the device included cardiac resynchronization therapy capability. Comorbidities were defined as preexisting conditions that result in an increase in the length-of-stay by at least one day. For orthopedic joint replacement and spine procedures, complications were in-hospital events serious enough to result in at least one extra day of hospital stay. For angioplasty, pacemaker insertion, and implantable cardioverter-defibrillator insertion, complications were events serious enough to cause a shift in the patient's diagnosis-related group (DRG) assignment (each of these procedures has multiple DRG categories depending on whether the patient has major complications and comorbidities, minor complications and comorbidities, or none).
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24. The difference in revenues and contribution margins was statistically significant for all procedures (p < 0:05). The differences for costs per case were statistically significant at the p < 0:05 level for all procedures except lumbar fusion and pacemaker insertion, for which they were statistically significant only at the < 0:15 level.
25. For purposes of this analysis, concentrated markets were defined as those with a Herfindahl-Hirschman Index one standard deviation above the mean, while competitive markets were defined as those with an index one standard deviation below the mean. The market-related differences were calculated by multiplying the coefficient on the Herfindahl-Hirschman Index variable in the multivariate statistical regression of contribution margin by twice the standard eviation in the variable.
26. The difference in hospital margin between concentrated and competitive markets was statistically significant at the p < 0:05 level for all seven rocedures
27. The market-related Medicare margin differences were statistically significant at the p < 0:05 level for knee replacement, hip replacement, pacemaker insertion, and defibrillator insertion, but not statistically different from zero for the other three procedures studied
28. These differences in Medicare margins between concentrated and competitive local markets were statistically significant (p < 0:05)
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