Competition, Regulation and Hospital Costs, 1982–86

Department of Social and Administrative Health Sciences, School of Public Health, University of California, Berkeley 94720.
JAMA The Journal of the American Medical Association (Impact Factor: 35.29). 12/1988; 260(18):2676-81. DOI: 10.1001/jama.260.18.2676
Source: PubMed


We used data on 5490 nonfederal, short-term general hospitals to evaluate the relative effectiveness of regulatory and market-oriented cost-control policies on hospital cost inflation between 1982 and 1986. All-payer rate-regulation programs reduced inflation rates by 16.3% in Massachusetts, 15.4% in Maryland, and 6.3% in New York, compared with the control hospitals in 43 states with neither all-payer rate regulation nor an aggressive market-oriented strategy. New Jersey hospitals experienced a rate of cost inflation similar to the control hospitals. Given the effectiveness of its regulatory program in the 1970s, however, New Jersey began and ended the period from 1982 to 1986 with the lowest costs, controlling for wages and patient mix. California's market-oriented cost-control policy reduced inflation rates by 10.1%. Hospitals with large percentages of patients insured by Medicare's prospective payment system experienced cost inflation rates 16.1% lower than hospitals with small percentages of Medicare patients. Investor-owned hospitals experienced rates of cost increase 11.6% higher than private nonprofit hospitals and 15.0% higher than public hospitals.

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    • "Yet the need for strong state regulation is borne out by overseas experience. In the USA during the period between 1982 and 1986, studies show that it was the direct regulation of healthcare prices rather than market competition that led to a slowing of the rate of growth of hospital costs (Biles et al 1980; Robinson and Luft 1988). "
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    ABSTRACT: Over the past two decades the Australian healthcare sector has been fundamentally restructured by two developments – a redirection of government policy toward privatisation of publicly funded institutions, and a new interest in strategic investment from the corporate sector. Together these developments have dramatically reshaped the healthcare sector. This new healthcare sector is no longer dominated by large public institutions surrounded by a constellation of small, independent, practitioner owned and operated service facilities. In its place stand large corporations tied to government through contract agreements. As a consequence the incomes of these healthcare corporations depend almost entirely on the public purse. The changes to the sector can best be summarised as a transition from a ‘cottage industry’ of owner-operated facilities into a vertically and horizontally integrated ‘medical-industrial complex’ combining general practices, hospitals, insurance companies, research and teaching institutions, and services such as radiology and pathology.
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    • "Recent research on the effects of hospital competition and regulation yields ambiguous implications concerning the future of specialized psychiatric services (Luft, Robinson, Garnick, et al. 1986; Robinson and Luft 1988; Melnick and Zwanziger 1988). Both competition and regulation appear to be effective in restraining the rise in hospital costs. "
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    ABSTRACT: We performed detailed simulations of DRG-based payments to general hospitals for treatment of nonexempt psychiatric and medical/surgical patients under Medicare's prospective payment system (PPS). We then compared these results to calculated costs for the same patients. Hospitals without specialized psychiatric units tend to fare better financially on their psychiatric than on their medical/surgical caseloads, although the levels of gain for these two types of patients are correlated. Hospitals with nonexempt psychiatric units generally have similar rates of gain on psychiatric and medical/surgical patients. Comparing psychiatric treatment in "scatter-bed" sites with that provided in nonexempt units, the higher rate of gain under PPS for treatment in scatter beds results largely from shorter lengths of stay. We discuss hospital behavior and the relationships between treatment of psychiatric illness under DRG-based payment and its treatment in exempt psychiatric units, which are excluded from DRG-based payment.
    Health Services Research 01/1991; 25(5):785-808. · 2.78 Impact Factor
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    ABSTRACT: The purpose of this research is to determine factors associated with differential HMO enrollment growth across metropolitan statistical areas (MSAs). The study examines 2 periods, 1973-1978 and 1988-1993, during which national HMO enrollment grew substantially. Results for the 2 periods are compared to determine the stability of statistical relationships. Data was collected for the 75 largest U.S. MSAs as of 1990. The study uses multiple regression to test several hypotheses concerning the association of independent variables with HMO enrollment growth. Hypotheses concerning medical supply variables, hospital costs, per capita income, unionization, employment concentration, net migration, education and location are tested. Because of concerns about endogeneity, the values for medical supply and cost variables at the beginning of each 5-year period are used to estimate HMO market share growth. The study finds that the availability of physicians and other physician related factors are strongly associated with HMO enrollment growth during the 1973-1978 period, but that is not the case for the 1988-1993 period. For the earlier period, the percent of physicians (in the state) who are in group practice shows the strongest association. On the MSA level, an increase in the number of physicians in group practice by 1% of the physician population is associated with a .17% increase in overall HMO market share. The overall proportion of MDs in the MSA population also generated a statistically significant positive association, as did the overall proportion of RNs. None of the associations found for the 1973-1978 period are found for 1988-1993.
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