Strategic hospital alliances: impact on financial performance

Acute care hospitals have increasingly been forming local strategic hospital alliances (SHAs), which consume considerable resources in forming and may affect the competitiveness of provider markets. This research shows that SHAs and market factors, which have been perceived to be threats to hospitals, are related to hospitals' financial performance. Among the findings are that SHA members have higher net revenues but that they are not more effective at cost control. Nor do the higher net revenues result in higher cash flow. However, increasing SHA penetration in a market is related to lower net revenues per case. In addition, the penetration of private health maintenance organizations in markets is associated with lower revenues and expenses.     

Growth in HMO share of the Medicare market, 1989-1994

Between 1989 and 1994 the health maintenance organization (HMO) share of the Medicare market grew rapidly. It is still heavily concentrated geographically, however. The most influential factor in this growth is HMO penetration into an area's general health care market. Medicare payment rates and prior Medicare HMO penetration also have an impact, but their effects are much weaker. Thus, payment rate reform is likely to have only a modest impact on Medicare HMO growth in the short term. In the longer term, the HMO share of the Medicare market will continue to grow, because HMO penetration in the general health care market is growing rapidly.     

Health maintenance organization penetration and general hospital psychiatric services: Expenditure and utilization trends.

Expenditures for inpatient and outpatient psychiatric services provided through general hospitals and the utilization of those mental health and substance abuse services through general hospitals is examined for all states grouped by level of health maintenance organization (HMO) penetration. Between 1983 and 1990, outpatient use for general hospitals increased substantially for the high-HMO group but decreased in the low-HMO group. During the same time period, per capita expenditures for inpatient and outpatient psychiatric services grew fastest in low-HMO areas. These findings suggest that HMOs restrain the growth of general hospital psychiatric expenditures and encourage the growth of outpatient alternatives to inpatient treatment. (PsycINFO Database Record (c) 2010 APA, all rights reserved)     

Effects of market position and competition on rural hospital closures

OBJECTIVE: To examine the dynamic effects of competition and hospital market position on rural hospital closures. DATA SOURCE/STUDY SETTING: Analysis of all rural community hospitals operating between 1984 and 1991, with the exception of sole-provider hospitals. Data for the study are obtained from four sources: the AHA Annual Surveys of Hospitals, the HCFA Cost Reports, the Area Resource File, and a hospital address file constructed by Geographic Inc. DATA COLLECTION AND ANALYSIS: Variables are merged to construct pooled, time-series observations for study hospitals. Hospital closure is specified as a function of hospital market position, market level competition, and control variables. Discrete-time logistic regressions are used to test hypotheses. PRINCIPAL FINDINGS: Rural hospitals operating in markets with higher density had higher risk of closure. Rural hospitals that differentiated from others in the market on the basis of geographic distance, basic services, and high-tech services had lower risks of closure. Effects of market density on closure disappeared when market position was included in the model, indicating that differentiation in markets should be taken into account when evaluating the effects of competition on rural hospital closure. CONCLUSIONS: Our findings suggest that rural hospitals can reduce competitive pressures through differentiation and that accurate measures of competition in geographically defined market areas are critical for understanding competitive dynamics among rural hospitals.     

Dynamic cost shifting in hospitals: evidence from the 1980s and 1990s

The purpose of this paper is to determine whether dynamic cost shifting occurred among acute care hospitals during the period from the early 1980s to the early 1990s and, if so, whether market factors affected the ability to shift costs. Evidence from this study of California acute care hospitals during three time intervals shows that the hospital did practice dynamic cost shifting, but that their ability to shift costs decreased over time. Surprisingly, hospital competition and HMO penetration did not influence cost shifting. However, increasing HMO penetration (measured as the HMO percentage of hospital discharges) did decrease both net prices and costs for the early part of the study, but later was associated with increases in both.     

The blending of competitive and regulatory strategies: a second opinion

A comparison of the 10 states that as of 30 June 1994 witnessed the highest and lowest percent of health maintenance organization market penetration, and the findings reported in the Dartmouth Atlas of Health Care in the United States, both illustrate dramatic differences among the various states in the distribution, utilization, and cost of hospital and other health services. This article thereafter focuses on the implications of these findings in the context of the states eventually blending competitive and regulatory strategies to constrain hospital expenditures-a conceptual framework that is consistent with Americans being advocates of pluralism when organizing and financing their health care system.     

Market influences on internal medicine residents' decisions to subspecialize

BACKGROUND: Managed care reduces the demand for internal medicine subspecialists, but little empirical information is available on how increasing managed care may be affecting residents' training choices. OBJECTIVE: To determine whether increased managed care penetration into an area where residents train was associated with a decreased likelihood that residents who completed general internal medicine training pursued subspecialty training. DESIGN: Secondary logistic regression analysis of data from the 1993 cohort of general internal medicine residents. SETTING: U.S. residency training sites. PARTICIPANTS: 2263 U.S. medical school graduates who completed general internal medicine residency training in 1993. MEASUREMENTS: The outcome variable (enrollment in subspecialty training) was derived from the Graduate Medical Education Tracking Census of the Association of American Medical Colleges (AAMC). Health maintenance organization (HMO) penetration (possible range, 0.0 to 1.0; higher values indicate greater penetration) was taken from the Interstudy Competitive Edge Database. Individual and medical school covariates were taken from the AAMC's Student and Applicant Information Management System database and the National Institutes of Health Information for Management Planning, Analysis, and Coordination system. The U.S. Census division was included as a control covariate. RESULTS: 980 participants (43%) enrolled in subspecialty training. Logistic regression analyses indicated a nonlinear association between managed care penetration into a training area and the odds of subspecialization. Increasing managed care penetration was associated with decreasing odds of subspecialization when penetration exceeded 0.15. The choice of subspecialty training increased as HMO penetration increased from 0 to 0.15. CONCLUSIONS: Local market forces locally influenced the career decisions of internal medicine residents, but the influence was small compared with the effects of age and sex. These results suggest that market forces help to achieve more desirable generalist-to-specialist physician ratios in internal medicine.     

Which types of hospital mergers save consumers money?

This study analyzes the changes in costs and prices from 1986 to 1994 for more than 3,500 U.S. short-term general hospitals, including 122 horizontal mergers. These mergers were generally financially beneficial to consumers, providing average price reductions of approximately 7 percent. Merger-related price reductions were considerably less in market areas with higher market concentration levels. Merger-related price reductions in areas with higher penetration by health maintenance organizations (HMOs) were approximately twice those in areas with lower HMO penetration. Merger-related price reductions were greater for low-occupancy hospitals, nonteaching hospitals, nonsystem hospitals, similar-size hospitals, and hospitals with greater premerger service duplication.     

Benchmarking the US physician workforce. An alternative to needs-based or demand-based planning

OBJECTIVE: To propose population-based benchmarking as an alternative to needs- or demand-based planning for estimating a reasonably sized, clinically active physician workforce for the United States and its regional health care markets. DESIGN: Cross-sectional analysis of 1993 American Medical Association and American Osteopathic Association physician masterfiles. POPULATION: The resident population of the 306 hospital referral regions in the United States. MAIN OUTCOME MEASURES: Per capita number of clinically active physicians by specialty adjusted for age and sex population differences and out-of-region health care utilization. The measured physician workforce was compared with 4 benchmarks: the staffing within a large (2.4 million members) health maintenance organization (HMO), a hospital referral region dominated by managed care (Minneapolis, Minn), a hospital referral region dominated by fee-for-service (Wichita, Kan), and the proposed "balanced" physician supply (50% generalists). RESULTS: The proportion of the US population residing in hospital referral regions with a higher per capita generalist workforce than the benchmark was 96% for the HMO benchmark, 60% for Wichita, and 27% for Minneapolis. The specialist workforce exceeded all 3 benchmarks for 74% of the population. The per capita workforce of generalists was not related to the proportion of generalists among regions (Pearson correlation coefficient=0.06; P=.26). CONCLUSIONS: Population-based benchmarking offers practical advantages to needs- or demand-based planning for estimating a reasonably sized per capita workforce of clinically active physicians. The physician workforce within the benchmarks of an HMO and health care markets indicates the varying opportunities for regional physician employment and services. The ratio of generalists to specialists does not measure the adequacy of the supply of the generalist workforce either nationally or for specific regions. Research measuring the relationship between physician workforces of different sizes and population outcomes will guide the selection of future regional benchmarks.     

How do HMOs achieve savings? The effectiveness of one organization's strategies

OBJECTIVE: To examine how a group practice used organizational strategies rather than provider-level incentives to achieve savings for health maintenance organization (HMO) compared to fee-for-service (FFS) patients. DATA SOURCES/STUDY SETTING: A large group practice with a group model HMO also treating FFS patients. Data sources were all patient encounter records, demographic files, and clinic records covering 3.5 years (1986-1989). The clinic's procedures to record services and charges were identical for FFS and HMO patients. All FFS and HMO patients under age 65 who received any outpatient services during approximately 100,000 episodes of the seven study illnesses were eligible. STUDY DESIGN: Using an explanatory case design, we first compared HMO and FFS rates of resource utilization, in standardized dollars, which measured the impact of organizational strategies to influence patient and provider behavior. We then examined the effect of HMO insurance and organizational measures to explain total outpatient use. Key variables were standardized charges for all outpatient services and the HMO's strategies. PRINCIPAL FINDINGS: Patient and provider behavior responded to organizational strategies designed to achieve savings for HMO patients; for instance, HMO patients used midlevel providers and generalists more often and ER and specialists less often. Overall HMO savings, adjusted for case mix, were explained by the specialty of the physicians the patients first visited and appeared to affect patients with average health more than others. CONCLUSION: Organizational strategies, without resort to differential financial incentives to each provider, resulted in lower rates of outpatient services for HMO patients. Savings from outpatient use, especially for common diseases that rarely require hospitalization, can be substantial.     

How reminders given to patients and physicians affected pap smear use in a health maintenance organization: results of a randomized controlled trial

BACKGROUND: Despite its effectiveness as a method of controlling cervical carcinoma, the use of Pap smear testing remains incomplete, and its promotion in the primary care setting provides an important opportunity for intervention. METHODS: The authors conducted a randomized controlled trial that involved three sites of a health maintenance organization (HMO) serving an urban minority population. Their aim was to evaluate the impact of reminders given to patients and physicians on site visitation by patients and Pap smear use. Eligible women (n=5801) were randomly assigned to 1 of 4 intervention combinations (in which reminders were given to either the patient or the physician, to both, or to neither). If they were ineligible for patient reminder intervention, patients were randomized only to physician reminder intervention (the presence or absence of it). The letter of reminder mailed to the patient invited women due for Pap smears to visit the HMO site, and the reminder for physicians was a medical record notice that a Pap smear was due. Logistic and survival analyses were used to investigate the correlation of intervention status with visitation, interval of time to a visit, and Pap smear use. RESULTS: In the primary intent-to-treat analysis, there was no significant effect of either patient or physician reminder interventions on rates of visitation or Pap smear completion. The secondary efficacy analyses demonstrated no overall effect of either patient or physician reminders, but effects among subgroups of women at individual HMO sites were noted. At Site 3, there was an apparent increase in time to the next visit among the subgroup of women with a chronic illness (16 weeks with intervention vs. 9 weeks without). With the physician reminder, the odds that a Pap smear would be given during the study year were increased among women without a previous Pap smear at Site 1 (adjusted odds ratio=1.39) and those with a chronic illness at Site 2 (adjusted odds ratio=3.38). CONCLUSIONS: Reminders given to patients and physicians had a limited impact on visitation by patients to the HMO sites or Pap smear completion. Although some subgroups of women may benefit, the authors also observed a possibly unfavorable impact among other subgroups. These results emphasize the importance of identifying more effective interventions, targeting them to women most likely to benefit, and not overlooking the possibility that preventive intervention will have an unanticipated adverse effect.     

The impact of payor/provider type on health care use and expenditures among the frail elderly

OBJECTIVES: This study examined whether health care expenditures and usage by the frail elderly differ under three payor/provider types: Medicare fee for service, Medicare health maintenance organization (HMO), and dual Medicare-Medicaid enrollment. METHODS: In-home interviews were conducted among 450 frail elderly patients of a San Diego, Calif, health care system. Cost and use data were collected from providers. RESULTS: Analyses revealed no difference in total expenditures between fee-for-service and HMO enrollees, but Medicare-Medicaid beneficiaries' expenditures were 46.8% higher than those for HMO enrollees and 52.2% higher than those for the fee-for-service group. Fee-for-service participants were less than half as likely as HMO enrollees to have two or more hospital admissions, but hospital usage rates between those two payor/provider groups did not differ. Not were there payor/provider differences in access to home health care, but HMO home health care users received significantly fewer services than the others. CONCLUSIONS: The care provided to these HMO beneficiaries resulted in a combination of restricted home health use and higher multiple hospitalizations. This raises compelling questions for future research. For the dually enrolled, stronger cost containment may be required.     

HMO market structure and performance: 1985-1995

This paper estimates the effect of market structure on hospital days and ambulatory visits in independent practice associations (IPAs) and group-model health maintenance organizations (HMOs) where market structure is measured by HMO penetration and the number of HMOs operating in a market. There was a steady decline in inpatient use in HMOs during the study period and a steady increase in use of ambulatory care. In multivariate analyses, inpatient use is significantly higher in IPAs, but there is no difference in ambulatory use. As HMO penetration increases and the number of HMOs increases, group-model HMOs have lower hospital use and greater ambulatory use. In contrast, use of both inpatient and ambulatory care decreases in IPAs but only at high levels of penetration and numbers of competitors.     

Costs of acid-related disorders to a health maintenance organization

BACKGROUND: Little is known about the economic impact of the acid-related disorders (ARDs), which include dyspepsia, gastritis, gastroesophageal reflux disease (GERD), and peptic ulcer disease (PUD), in managed care patient populations. OBJECTIVES: To describe the prevalence of medically attended ARDs, and their direct medical costs from the perspective of a large health maintenance organization (HMO). METHODS: A total of 1,550 ARDs subjects (age > or = 18 years), were randomly sampled from outpatient diagnosis and pharmacy databases of the Kaiser Permanente Medical Care Program of Northern California and verified by chart review. Five age- and gender-matched controls were identified per subject. One-year prevalence, excess annual costs, and initial 6-month costs for incident cases were estimated using the HMO cost accounting system. RESULTS: Total ARDs prevalence (5.8%) increases with advancing age. GERD is the most common ARD (2.9% overall prevalence). Annual per person attributable costs were $1,183, $471, and $431 respectively for PUD, GERD, and gastritis/dyspepsia. Excess inpatient costs for PUD explain its higher costs. Outpatient costs were somewhat higher for GERD ($279) than for PUD or gastritis/dyspepsia. Pharmacy costs were relatively low for each condition, in part because many patients were treated with generic cimetidine. Total annual HMO expenditures for ARDs were $59.4 million, with 40.6%, 36.8%, and 22.6% respectively for GERD, PUD, and gastritis/dyspepsia. CONCLUSIONS: Acid-related disorders, particularly GERD and PUD, contribute substantially to the direct costs of medical care in this managed care population.     

Do "America's Best Hospitals" perform better for acute myocardial infarction?

BACKGROUND: "America's Best Hospitals," an influential list published annually by U.S. News and World Report, assesses the quality of hospitals. It is not known whether patients admitted to hospitals ranked at the top in cardiology have lower short-term mortality from acute myocardial infarction than those admitted to other hospitals or whether differences in mortality are explained by differential use of recommended therapies. METHODS: Using data from the Cooperative Cardiovascular Project on 149,177 elderly Medicare beneficiaries with acute myocardial infarction in 1994 or 1995, we examined the care and outcomes of patients admitted to three types of hospitals: those ranked high in cardiology (top-ranked hospitals); hospitals not in the top rank that had on-site facilities for cardiac catheterization, coronary angioplasty, and bypass surgery (similarly equipped hospitals); and the remaining hospitals (non-similarly equipped hospitals). We compared 30-day mortality; the rates of use of aspirin, beta-blockers, and reperfusion; and the relation of differences in rates of therapy to short-term mortality. RESULTS: Admission to a top-ranked hospital was associated with lower adjusted 30-day mortality (odds ratio, 0.87; 95 percent confidence interval, 0.76 to 1.00; P=0.05 for top-ranked hospitals vs. the others). Among patients without contraindications to therapy, top-ranked hospitals had significantly higher rates of use of aspirin (96.2 percent, as compared with 88.6 percent for similarly equipped hospitals and 83.4 percent for non-similarly equipped hospitals; P<0.01) and beta-blockers (75.0 percent vs. 61.8 percent and 58.7 percent, P<0.01), but lower rates of reperfusion therapy (61.0 percent vs. 70.7 percent and 65.6 percent, P=0.03). The survival advantage associated with admission to top-ranked hospitals was less strong after we adjusted for factors including the use of aspirin and beta-blockers (odds ratio, 0.94; 95 percent confidence interval, 0.82 to 1.08; P=0.38). CONCLUSIONS: Admission to a hospital ranked high on the list of "America's Best Hospitals" was associated with lower 30-day mortality among elderly patients with acute myocardial infarction. A substantial portion of the survival advantage may be associated with these hospitals' higher rates of use of aspirin and beta-blocker therapy.     

Teaching hospital costs: implications for academic missions in a competitive market

CONTEXT: As the managed care environment demands lower prices and a greater focus on primary care, the high cost of teaching hospitals may adversely affect their ability to carry out academic missions. OBJECTIVE: To develop a national estimate of total inpatient hospital costs related to graduate medical education (GME). DESIGN: Using Medicare cost report data for fiscal year 1993, we developed a series of regression models to analyze the relationship between inpatient hospital costs per case and explanatory variables, such as case mix, wage levels, local market characteristics, and teaching intensity (the ratio of interns and residents to beds). SETTING AND PARTICIPANTS: A total of 4764 nonfederal, general acute care hospitals, including 1014 teaching hospitals. MAJOR OUTCOME MEASURES: Actual direct GME hospital costs and estimated indirect GME-related hospital costs based on the statistical relationship between teaching intensity and inpatient costs per case. RESULTS: In 1993, academic medical center (AMC) costs per case were 82.9% higher than those for urban nonteaching hospitals (actual cost per case, $9901 vs $5412, respectively). Non-AMC teaching hospital costs per case were 22.5% higher than those for nonteaching hospitals (actual cost per differences in case, $6630 vs $5412, respectively). After adjustment for case mix, wage levels, and direct GME costs, AMCs were 44% more expensive and other teaching hospitals were 14% more costly than nonteaching hospitals. The majority of this difference is explained by teaching intensity. Total estimated US direct and indirect GME-related costs were between $18.1 billion and $22.8 billion in 1997. These estimates include some indirect costs, not directly educational in nature, related to clinical research activities and specialized service capacity. CONCLUSIONS: The cost of teaching hospitals relative to their nonteaching counterparts justifies concern about the potential financial impact of competitive markets on academic missions. The 1997 GME-related cost estimates provide a starting point as public funding mechanisms for academic missions are debated. The efficiency of residency programs, their consistency with national health workforce needs, financial benefits provided to teaching hospitals, and ability of AMCs to maintain higher payment rates are also important considerations in determining future levels of public financial support.     

Unusual case of biclonal gammopathy of undetermined significance]

OBJECTIVE: This was a pilot teleradiology project connecting two secondary KwaZulu-Natal hospitals' radiography departments to a central Durban teaching hospital. The purpose of the study was to assess the usefulness of same-day teleradiology reports to the medical staff and whether such a service changed patient management. DESIGN: After 1 month's service at each hospital, the first 200 teleradiology reports, original radiographs and patients' case notes were reviewed to determine whether any errors in interpretation of the radiographs had been made and whether the reports had changed patient management. RESULTS: The service changed patient management in 10% of cases. Undetected pathology was recognised by the radiologist in 20 patients--pulmonary tuberculosis in 10, spinal tuberculosis in 3, miliary tuberculosis in 2 and fractures in 5. Problems were encountered with transmission of data using the current telephone network, loss of data at the receiving station and the increased workload of the radiographer transmitting the data. CONCLUSIONS: Teleradiology services do make a positive impact on patient management in rural hospitals. However, there are many technical pitfalls that must be avoided in order to establish an effective service.     

Marketing HMOs to Medicare beneficiaries

Medicare health maintenance organizations (HMOs) market extensively to attract beneficiaries. To assess the dynamics of this marketing, this paper examines newspaper and television ads and materials from marketing seminars that are illustrative of Medicare HMOs' marketing activities in four major media markets. Lower costs and better benefits are pitched in the majority of the ads. Image and content analyses suggest that, in general, HMO ads appear to market to healthy seniors and not to the sick or to disabled persons under age sixty-five. Important plan information often appears in fine print. The study raises questions about the impact of marketing on beneficiaries' insurance choices and the challenges facing the Health Care Financing Administration (HCFA) in establishing and enforcing marketing guidelines.     

The Benchmarking Effort for Networking Children's Hospitals (BENCHmark)

BACKGROUND: In 1992, 12 large children's hospitals established the Benchmarking Effort for Networking Children's Hospitals (BENCHmark). The goal was for the BENCHmark effort to supplement the hospitals' continuous quality improvement (CQI) programs and to speed adoption of best practices from peer institutions. For three years, the hospitals have been comparing data on cost, quality, and speed indicators. Also, "best practice" groups have met to share information on how processes can be improved. RESULTS: The BENCHmark hospitals have experienced significant process improvement in areas such as emergency department waiting time and admitting process time. EXAMPLE: The BENCHmark hospitals selected admitting as one of the first best practice groups to meet. Interdisciplinary staff from all BENCHmark hospitals met three times over the course of a year to define their indicator and share information on best practices. St Louis Children's Hospital, as a result, instituted a pre-arrival team and cross-trained staff, with the result being a reduction of admitting processing time from 58 minutes to 19 minutes. Same-day surgery patients now bypass the admitting department and go directly to the surgical floor. Patient and surgeon satisfaction has increased greatly. CONCLUSIONS: Hospitals that are planning to benchmark are encouraged to reach consensus on project goals and to focus on indicators that provide a clear business advantage. Physician involvement is key to improving performance and physicians will only be engaged if the hospitals against whom they are benchmarked are considered peers. Being willing to share initial data openly seems to be a key factor in determining successful integration of the BENCHmark process into hospital CQI efforts. The BENCHmark project has been so successful that a second group of 12 comparable pediatric institutions, known as the Network II, has been established.