Vivian Y. Wu

Managed care's price bargaining with hospitals

Research has shown that managed care (MC) slowed the rate of growth in health care spending in the 1990s, primarily via lower unit prices paid. However, the mechanism of MCs price bargaining has not been well studied. This article uses a unique panel dataset with actual hospital prices in Massachusetts between 1994 and 2000 to examine the sources of MCs bargaining power. I find two significant determinants of price discounts. First, plans with large memberships are able to extract volume discounts across hospitals. Second, health plans that are more successful at channeling patients can extract greater discounts. Patient channeling can add to the volume discount that plans negotiate.

Hospital cost shifting revisited: new evidence from the balanced budget act of 1997

This paper analyzes hospital cost shifting using a natural experiment generated by the Balanced Budget Act (BBA) of 1997. I find evidence that urban hospitals were able to shift part of the burden of Medicare payment reduction onto private payers. However, the overall estimated degree of cost shifting is small and varies according to a hospital’s share of private patients. At hospitals where Medicare is a small payer relative to private insurers, up to 37% of BBA cuts was transferred to private payers through higher payments. In contrast, hospitals with greater reliance on Medicare were more financially distressed, as these hospitals saw large BBA cuts but were limited in their abilities to cost shift.

How Do Hospitals Cope with Sustained Slow Growth in Medicare Prices

ObjectiveTo estimate the effects of changes in Medicare inpatient hospital prices on hospitals’ overall revenues, operating expenses, profits, assets, and staffing. Primary Data SourceMedicare hospital cost reports (1996–2009). Study DesignFor each hospital, we quantify the year-to-year price impacts from changes in the Medicare payment formula. We use cumulative simulated price impacts as instruments for Medicare inpatient revenues. We use a series of two-stage least squares panel data regressions to estimate the effects of changes in Medicare revenues among all hospitals, and separately among not-for-profit versus for-profit hospitals, and among hospitals experiencing real price increases (“gainers”) versus decreases (“losers”). Principal FindingsMedicare price cuts are associated with reductions in overall revenues even larger than the direct Medicare price effect, consistent with price spillovers. Among not-for-profit hospitals, revenue reductions are fully offset by reductions in operating expenses, and profits are unchanged. Among for-profit hospitals, revenue reductions decrease profits one-for-one. Responses of gainers and losers are roughly symmetrical. ConclusionsOn average, hospitals do not appear to make up for Medicare cuts by “cost shifting,” but by adjusting their operating expenses over the long run. The Medicare price cuts in the Affordable Care Act will “bend the curve,” that is, significantly slow the growth in hospitals’ total revenues and operating expenses.

Inverse association between cancer risks and age in schizophrenic patients: A 12‐year nationwide cohort study

The association between schizophrenia and cancer risk is contentious in the clinical and epidemiological literature. Studies from different populations, tumor sites, or health care systems have provided inconsistent findings. In the present study, we examined a less well‐investigated hypothesis that age plays a crucial role in cancer risk in schizophrenia. We conducted a nationwide cohort study using Taiwans National Health Insurance Research Database (NHIRD) between 1995 and 2007. Overall, gender‐, and age‐stratified standardized incidence ratios (SIR) were used to investigate the pattern of cancer risk by age. Of the 102 202 schizophrenic patients, 1738 developed cancer after a diagnosis of schizophrenia (SIR = 0.92; 95% confidence interval [CI] 0.90–0.96). However, the age‐stratified SIR declined with age (e.g. SIR [95% CI] = 1.97 [1.85–2.33], 0.68 [0.65–0.78], and 0.36 [0.34–0.45] for those aged 20–29, 60–69, and ≥70 years, respectively) in both genders and for major cancers. Cancer risks in schizophrenic patients were lower for cancers that are more likely to develop at an older age in the general population (e.g. stomach cancer [SIR = 0.62; 95% CI 0.57–0.80], pancreatic cancer [SIR = 0.49; 95% CI 0.39–0.84], and prostate cancer [SIR = 0.35; 95% CI 0.29–0.58]). In contrast, cancer risks were higher for cancers that have a younger age of onset, such as cancers of the nasopharynx (SIR = 1.18; 95% CI 1.08–1.49), breast (SIR = 1.50; 95% CI 1.44–1.66) and uterine corpus (SIR = 2.15; 95% CI 1.98–2.74). The unique age structures and early aging potential of schizophrenia populations may contribute to the observed inverse relationship between age and cancer risk. Higher cancer comorbidity in young schizophrenic patients deserves more attention.

Trends in Hospital Cost and Revenue, 1994–2005: How Are They Related to HMO Penetration, Concentration, and For-Profit Ownership?

OBJECTIVE Analyze trends in hospital cost and revenue, as well as price and quantity (1994-2005) as a function of health maintenance organization (HMO) penetration, HMO concentration, and for-profit (FP) HMO market share. DATA Medicare hospital cost reports, AHA Annual Surveys, HMO data from Interstudy, and other supplemental data. STUDY DESIGN A retrospective study of all short-term, general, nonfederal hospitals in metropolitan statistical areas (MSAs) in the United States from 1994 to 2005, using hospital/MSA fixed-effects translog regression models. PRINCIPAL FINDINGS A 10 percentage point increase in HMO enrollment is associated with 4.1-4.2 percent reduction in costs and revenues in the pre-2000 period but only a 2.1-2.5 percent reduction in the post-2000 period. Hospital revenue in HMO-dominant markets (highly concentrated HMO market and competitive hospital market) is 19-27 percent lower than other types of markets, and the difference is most likely due mainly to lower prices and to a lesser extent lower utilization. CONCLUSIONS The historical difference of lower spending in high HMO penetration markets compared with low HMO markets narrowed after 2000 and the relative concentration between HMO and hospital markets can substantially influence hospital spending. Additional research is needed to understand how different aspects of these two markets have changed and interacted and how they are causally linked to spending trends.

The Long-Term Impact of Medicare Payment Reductions on Patient Outcomes

OBJECTIVE To examine the long-term impact of Medicare payment reductions on patient outcomes for Medicare acute myocardial infarction (AMI) patients. DATA SOURCES Analysis of secondary data compiled from 100 percent Medicare Provider Analysis and Review between 1995 and 2005, Medicare hospital cost reports, Inpatient Prospective Payment System Payment Impact Files, American Hospital Association annual surveys, InterStudy, Area Resource Files, and County Business Patterns. STUDY DESIGN We used a natural experiment-the Balanced Budget Act (BBA) of 1997-as an instrument to predict cumulative Medicare revenue loss due solely to the BBA, and basing on the predicted loss categorized hospitals into small, moderate, or large payment-cut groups and followed Medicare AMI patient outcomes in these hospitals over an 11-year panel between 1995 and 2005. PRINCIPAL FINDINGS We found that while Medicare AMI mortality trends remained similar across hospitals between pre-BBA and initial-BBA periods, hospitals facing large payment cuts saw smaller improvement in mortality rates relative to that of hospitals facing small cuts in the post-BBA period. Part of the relatively higher AMI mortalities among large-cut hospitals might be related to reductions in staffing levels and operating costs, and a small part might be due to patient selection. CONCLUSIONS We found evidence that hospitals facing large Medicare payment cuts as a result of BBA of 1997 were associated with deteriorating patient outcomes in the long run. Medicare payment reductions may have an unintended consequence of widening the gap in quality across hospitals.

Effectiveness of aripiprazole, olanzapine, quetiapine, and risperidone augmentation treatment for major depressive disorder: a nationwide population-based study.

OBJECTIVE Previous studies suggested that antidepressants augmented with second-generation antipsychotics (SGAs), including aripiprazole, olanzapine, quetiapine, and risperidone, resulted in better treatment response or higher rates of remission in patients with major depressive disorder (MDD). However, population-based study on SGA augmentation for patients with MDD remains limited. The purpose of this study was to investigate the effectiveness of SGA augmentation for treatment of MDD using the National Health Insurance Research Database in Taiwan. METHOD The subjects were patients with MDD (ICD-9-CM code: 296.2 and 296.3) who were initially admitted to psychiatric inpatient settings for the first time between January 1, 1996, and December 31, 2007, and could be tracked until December 31, 2011. To assess the treatment effect of SGA augmentation, 993 MDD patients who received aripiprazole, olanzapine, quetiapine, or risperidone augmentation treatment for 8 weeks or more were included in this 1-year mirror-image study. Outcome measures included length of psychiatric hospitalization and number of psychiatric admissions and emergency room (ER) visits. RESULTS After patients received SGA augmentation treatment, key psychiatric service use (including length of psychiatric hospitalization [P < .0001], number of psychiatric admissions [P < .0001], and ER visits [P = .0006]) due to MDD diagnosis was significantly reduced. Subgrouping analysis for each SGA drug also showed significant reduction in number of psychiatric admissions for MDD patients who received aripiprazole (P < .0001), olanzapine (P = .003), quetiapine (P < .0001), and risperidone (P < .0001). CONCLUSIONS The study provides support that aripiprazole, olanzapine, quetiapine, and risperidone augmentation therapy could be effective in reducing psychiatric service utilization among MDD patients.

Reductions in Medicare payments and patient outcomes: an analysis of 5 leading Medicare conditions.

Background:The Affordable Care Act enacted significant Medicare payment reductions to providers, yet the effects of such major reductions on patients remain unclear. We used the Balanced Budget Act (BBA) of 1997 as a natural experiment to study the long-term consequence of major payment reductions on patient outcomes. Objectives:To analyze whether mortality trends diverge over the years between hospitals facing different levels of payment cuts because of the BBA for 5 leading conditions: acute myocardial infarction, congestive heart failure, stroke, pneumonia, and hip fracture. Research Design:Using 100% Medicare claims between 1995 and 2005, hospital database, and published reports on BBA policy components, we compared changes in outcomes between hospitals facing small and large BBA payment reductions across 3 periods (pre-BBA, initial-BBA, and post-BBA) using instrumental variable hospital fixed-effects regression models. Setting:All general, acute, nonrural, short-stay hospitals in the United States 1995—2005. Main Outcome Measures:Hospital risk-adjusted mortality rates (7, 30, 90 d, and 1 y). Results:Mortality trends between hospitals in small and large payment-cut categories were similar between pre-BBA and initial-BBA periods, but diverged in the post-BBA period. Relative to the small-cut hospitals, hospitals in the large-cut category experienced smaller decline in 1-year mortality rates in the post-BBA period compared with their pre-BBA trends by 0.8–1.4 percentage points, depending on the condition (P<0.05 for all conditions, except for hip fracture). Conclusion:We found consistent evidence across multiple conditions that reductions in Medicare payments are associated with slower improvement in mortality outcomes.

Decomposition of the drivers of the U.S. hospital spending growth, 2001–2009

BackgroundUnited States health care spending rose rapidly in the 2000s, after a period of temporary slowdown in the 1990s. However, the description of the overall trend and the understanding of the underlying drivers of this trend are very limited. This study investigates how well historical hospital cost/revenue drivers explain the recent hospital spending trend in the 2000s, and how important each of these drivers is.MethodsWe used aggregated time series data to describe the trend in total hospital spending, price, and quantity between 2001 and 2009. We used the Oaxaca-Blinder method to investigate the relative importance of major hospital cost/spending drivers (derived from the literature) in explaining the change in hospital spending patterns between 2001 and 2007. We assembled data from Medicare Cost Reports, American Hospital Association annual surveys, Prospective Payment System (PPS) Impact Files, Medicare Provider Analysis and Review (MedPAR) Medicare claims data, InterStudy reports, National Health Expenditure data, and Area Resource Files.ResultsAggregated time series trends show that high hospital spending between 2001 and 2009 appears to be driven by higher payment per unit of hospital output, not by increased utilization. Results using the Oaxaca-Blinder regression decomposition method indicate that changes in historically important spending drivers explain a limited 30% of unit-payment growth, but a higher 60% of utilization growth. Hospital staffing and labor-related costs, casemix, and demographics are the most important drivers of higher hospital revenue, utilization, and unit-payment. Technology is associated with lower utilization, higher unit payment, and limited increases in total revenue. Market competition, primarily because of increased managed care concentration, moderates total revenue growth by driving lower unit payment.ConclusionsMuch of the rapidly rising hospital spending growth in the 2000s in the United States is driven by factors not commonly known or well measured. Future studies need to explore new factors and dynamics that drive longer-term hospital spending growth in recent years, particularly through the channel of higher prices.

The Price Effect of Hospital Closures

This paper analyzes the anti-competitive effect of hospital closures between 1993 and 1998. Using a modified rival analysis with difference-in-differences (DD) and difference-in-difference-in-differences (DDD) identification strategies, this study finds that competitors located nearest to closed hospitals were best able to improve their bargaining position. Moreover, rivals that experienced multiple neighborhood closures, that faced large closures relative to their own sizes, and that were located in more concentrated markets were all able to raise prices even more. The overall estimate suggests a 4%, one-time, permanent price increase due to closure, a strong price effect that has been overlooked in the literature.