Joseph Valvona

Diffusion of surgical technology: An exploratory study

The study presents an empirical analysis of the diffusion patterns of five surgical procedures. Roles of payer mix, regulatory policies, physician diffusion, competition among hospitals, and various hospital characteristics such as size and the spread of technologies are examined. The principal data base is a time series cross-section of 521 hospitals based on discharge abstracts sent to the Commission on Professional and Hospital Activities. Results on the whole are consistent with a framework used to study innovations in other contexts in which the decisions of whether to innovate and timing depend on anticipated streams of returns and cost. Innovation tends to be more likely to occur in markets in which the more generous payers predominate. But the marginal effects of payer mix are small compared to effects of location and hospital characteristics, such as size and teaching status. Hospital rate-setting sometimes retarded diffusion. Certificate of need programs did not.

Medicare prospective payment and posthospital transfers to subacute care.

This study analyzed the early effects of the Medicare Prospective Payment System (PPS) on the likelihood of hospital’s discharging Medicare beneficiaries to skilled nursing facilities (SNFs), intermediate care facilities (ICFs), and home health agencies. It also examined length of stay before transfer. Discharge abstract data on patients in five DRG groups were studied. Data were obtained from 501 hospitals for the third quarters of 1980, 1983, 1984, and 1985. Multinomial logit and ordinary least squares regression techniques were employed.After controlling for hospital and patient characteristics, including severity of illness, it was found that the probability of transfer increased substantially in virtually all DRGs and discharge destinations studied. This was particularly true for patients with stroke, pneumonia, and major joint and hip procedure.The analysis reveals that PPS increased the rate of discharges to subacute facilities. This effect was stronger for transfer to SNFs than to ICFs and home health agencies. Further, the impact of PPS on transfers was greater in 1985 than in 1984. Lengths of stay before transfer tended to decline in almost all DRGs and destinations examined. However, the effects of PPS on lengths of stay of transferred patients were not statistically significant at conventional levels. The results suggest that payment experiments with broader forms of bundled services are in order, as are experiments with hospital acute-subacute swing beds.

Medicare prospective payment and the use of medical technologies in hospitals.

Medicares Prospective Payment System (PPS) created incentives to reduce the application of technology to hospitalized Medicare beneficiaries. Using data from 501 hospitals from 1980 and 1983-85, this study assesses changes in use of intensive care units and use of nonsurgical procedures before versus after implementation of PPS. The percent of hospitalized patients, both Medicare and non-Medicare, admitted to intensive care units increased post-PPS. Also, stays within such units remained constant. However, the percent of inpatients to whom several nonsurgical procedures were administered was lower post-PPS. For some (e.g., CAT scanning), the percentage of inpatients having the procedure continued to increase after PPS but at a much slower rate. For others, the percent of inpatients with the procedure declined at a faster rate (e.g., intravenous pyelogram). Still others showed utilization increases during 1980–83 followed by declines thereafter (e.g., occupational and physical therapy). Before 1983, there was almost no change in the number of routine tests per inpatient (e.g., serology and blood chemistry). Afterwards, there were major decreases. PPS has influenced the in hospital use of many nonsurgical procedures by both Medicare and non-Medicare patients.

Cost of capital to the hospital sector

This paper provides estimates of the cost of equity and debt capital to for-profit and non-profit hospitals in the U.S. for the years 1972-83. The cost of equity is estimated using, alternatively, the Capital Asset Pricing Model and Arbitrage Pricing Theory. We find that the cost of equity capital, using either model, substantially exceeded anticipated inflation. The cost of debt capital was much lower. Accounting for the corporate tax shield on debt and capital paybacks by cost-based insurers lowered the net cost of capital to hospitals.

Why has hospital length of stay declined? An evaluation of alternative theories

This study evaluates the importance of several potential determinants of observed decreases in hospital stays for patients undergoing each of 11 surgical procedures using a panel of 521 hospitals covering 1971-1981. Observed decreases in stays for these patients were substantial. If anything, the complexity of cases treated rose and, for this reason, stays should have risen. Neither state prospective payment nor Professional Standards Review Organization programs reduced stays and may have increased them. Competitive influences had no effect. Changes in payer mix and hospital ownership were too small to have had an impact. Evidently the decreases were mainly due to improvements in surgical technique and other changes in medical practice. Several implications for Medicares new payment system are discussed.

Case shifting and the Medicare Prospective Payment System.

We assessed impacts of the Medicare Prospective Payment System (PPS) during its first two years of operation (1984-85) on 467 hospitals using data from the Commission on Professional and Hospital Activities and from the American Hospital Association. Medicare discharges as a per cent of total discharges remained constant between 1983 and 1985, but the per cent of uninsured patients increased, especially at large public hospitals. The number of Medicare and total discharges per hospital declined. The number of complex diagnosis related groups (DRGs) increased, both for Medicare and non-Medicare. This trend began before the implementation of PPS and affected all types of hospitals. There was also an appreciable increase in case mix types of hospitals. There was also an appreciable increase in case mix severity within specific DRGs during 1980-85. The proportion of total patients received from or transferred to other hospitals rose after 1983, but these increases were very small. The per cent of Medicare patients admitted through the emergency room increased, especially after 1983. By contrast, the share of total non-Medicare admissions through the emergency room (ER) remained stable. Although the growth of the number of uninsured and Medicare patients admitted through the ER predate PPS, they may be influenced by it and warrant further monitoring.

Prospective payment for hospital capital by Medicare: issues and options.

After this year, Medicare will no longer reimburse capital-related expenses. Instead, a new approach may be implemented. Should the new capital payment scheme be prospective? Should Medicare continue to recognize return on equity? What will be the relationship between Medicare payment and health care planning? These and other questions should be asked since the answers will directly affect the health care setting.