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The effect of HMOs on fee-for-service health care expenditures: evidence from Medicare.

This paper examines the relationship between HMO market share and fee-for-service health care expenditures using 1986-1990 county- and metropolitan statistical area-level data on Medicare expenditures and HMO market share. Fixed-effects estimates imply that fee-for-service expenditures are concave and decreasing in market share. Increases in market share from 20% to 30% are associated with 3-7% expenditure reductions. Instrumental variable estimates that exploit cross-sectional variation in HMO activity also indicate a concave relationship, with expenditures declining in market share for market shares above 15-18%, but imply larger expenditure responses to market share changes.

Catchment Area, Health↗

The transition from Medicaid fee-for-service to managed care among private practitioners in New York City: effect on immunization and screening rates.

OBJECTIVES: This study examined the association between participation in Medicaid managed care and up-to-date coverage for childhood immunizations and screenings among private practice physicians serving New York City's poorest neighborhoods. METHOD: A random sample of 2174 children 3-35 months of age was drawn from 60 physician practices in 1995, and a cross-sectional analysis was used to compare up-to-date status for immunizations, and lead and anemia screening tests, for children cared for by managed care and nonmanaged care physicians. In 1996, an independent sample of 2380 children from the same practices was used to compare up-to-date status for individual children enrolled in Medicaid managed care and children predominantly enrolled in traditional fee-for-service Medicaid. Information from physician interviews augmented chart review data. Chi-square analysis and logistic regression were used. RESULTS: Physicians who participate in Medicaid managed care and those who do not had equal up-to-date coverage for immunizations (41.0 vs. 36.9%, p = .527), and lead (46.8 vs. 38.7%, p = .199) and anemia screening (63.2 vs. 56.5%, p = .272). Measures of the process of care were also similar for the two groups of physicians. Children themselves enrolled in Medicaid managed care appeared significantly more likely to be up-to-date than their nonmanaged care counterparts for immunizations (OR = 1.53, p = .027) and anemia screening (OR = 2.95, p = .000). CONCLUSIONS: Participation in managed care does not seem to change physicians' overall preventive care practice behavior. Available data did not reveal major differences in demographics or health status between individual children enrolled in managed care and those not enrolled. That children enrolled in managed care were better immunized and screened than those in fee-for-service Medicaid suggests that physicians receiving compensation under two payment systems may treat children differently depending on each child's mode of reimbursement.

Anemia↗

Health outcomes and medicaid costs for frail older individuals: a case study of a MCO versus fee-for-service care.

Older individuals receiving both Medicare and Medicaid benefits are known to have a disproportionate burden of illness and high medical care costs. Elder Health, Inc., a private, for-profit managed care organization operating in Maryland under capitation rates from both Medicare and Medicaid, has tailored a medical practice to these individuals, with the stated objective of providing integrated care. This study compared 200 Elder Health patients with a closely matched group of dually eligible older individuals receiving care in fee-for-service practices. There was a baseline in-home structured interview with the patient, followed 1 year later with a telephone interview. Other data sources were Medicaid claims data and Elder Health's utilization records. The outcomes of interest were the patients' health and functional status, their satisfaction with care, rates of use of medical services, and costs to Medicaid. Elder Health patients had similar general health status, better functional status, and greater satisfaction with access to care but less satisfaction with information giving than the fee-for-service group. They received more primary care and preventive services and had less than half the number of hospital days. Costs to Medicaid were nearly identical. Institutional and community-based long-term care costs were not included in the analysis.As pressures mount for the Health Care Financing Administration to expand its prepaid contracts with private health plans and the need for integrated programs increase, quantitative assessment of innovative delivery models such as Elder Health, Inc. will be essential to ensure that patients' and the publics' interests are well served.

Aged↗

User fees, self-selection and the poor in Bangladesh.

The widespread uncontrolled introduction of user fees in any developing country is likely to have a disastrous impact on poorer patients. Furthermore, traditional targeting schemes aimed at their exemption are often expensive, difficult to administer and ineffective at reaching those in greatest need. This research study examines how user fees can raise revenue and target poorer patients, under the right market conditions, without resorting to costly targeting schemes. The authors draw their findings from case studies of cost recovery in the health and population sectors in Bangladesh. The mechanism suggested in the paper is to use self-selection. It is argued that under certain market conditions poorer patients will choose the health-care option that is appropriate to their means. They will thus identify themselves as poor without having to be selected or tested by an independent authority. This self-selection allows the relevant authorities to cross-subsidize their market choice by over-charging the non-poor in other segments of the market.

Bangladesh↗

Using willingness to pay to investigate regressiveness of user fees in health facilities in Tanzania.

The study uses data from the Tanzania Human Resources Development Survey (1994) on willingness to pay (WTP) for desired quality of health care at lower-level health facilities to assess potential regressiveness of user fees - a disproportionately higher negative effect of user fees on utilization of health services among the poor compared with the rich. Despite reports of extensive bypassing of the lower-level health facilities in Tanzania, the WTP for quality health care at these health facilities is surprisingly large. WTP was lower among the poor, female and elderly respondents. Almost one-quarter of the poorest 40% of the population was not willing to pay even when the quality of services met their expectations. The results suggest that: the utilization of health services at lower-level health facilities can be increased by improving the quality of care; and the implementation of uniform user charges in the public facilities may be regressive, adversely affecting utilization among the poor, women and the elderly. An effective system of exemptions and waivers will be required for the very poor who may not be able to pay even when quality of services is improved. The findings of the study have policy implications for the Tanzanian government's recent attempts to expand cost-sharing through community health funds at lower-level health facilities, being introduced since 1998.

Adult↗

Access to health care for all? User fees plus a Health Equity Fund in Sotnikum, Cambodia.

User fees in health services are a source of much debate because of their potential risk of negative effects on access to health care for the poor. A Health Equity Fund that identifies the poor and pays on their behalf may be an alternative to generally ineffective fee exemption policies. This paper presents the experience of such a Health Equity Fund, managed by a local non-governmental organization, in Sotnikum, Cambodia. It describes the results of the first 2 years of operations, investigates the constraints to equitable access to the district hospital and the effects of the Health Equity Fund on these constraints. The Health Equity Fund supported 16% of hospitalized patients. We found four major constraints to access: financial, geographical, informational and intra-household. The results of the study show that the Health Equity Fund effectively improves financial access for the poor, but that the poor continue to face many constraints for timely access. The study also found that the Health Equity Fund as set up in Sotnikum was very cost-effective, with minimal leakage to non-poor. Health Equity Funds managed by a local non-governmental organization seem to constitute a promising channel for donors who want to invest in poverty reduction. However, further research and experimentation are recommended in different contexts and with different set-ups.

Cambodia↗

The potential of organizations of fee-for-service physicians for achieving significant decreases in hospitalization.

Because hospitalization is a key factor in controlling health care costs and because fee-for-service remains the predominant mode of physician payment, a study was undertaken of the hospitalization experiences of open panel fee-for-service health maintenance organizations (IPA-HMOs) and Foundations for Medical Care (FMCs). Ten open panel plans were surveyed as to characteristics of their programs, physicians, and enrollees and their hospitalization rates. Although data were incomplete, three IPA-HMOs, described as case reports, did achieve striking reductions in hospital use relative to a comparison group or period. Salient characteristics of these plans that may influence hospital use are prepayment by enrollees, sharing by physicians of some financial risk, and effective peer review. Further study is needed, but preliminary indications are that IPA-HMOs have a role to play in reducing health care costs.

Costs and Cost Analysis↗

Financial impact of the Medicare Fee Schedule on a department of anesthesiology in an academic medical center: two scenarios.

The purpose of this study was to model the financial impact of the Medicare Fee Schedule (MFS) on an anesthesiology department in a large academic medical center under two different scenarios. Scenario 1 assumes continued use of actual-time units throughout the five-year transition period. Scenario 2 assumes a change to the use of average-time units by the time the MFS is fully implemented in 1996. Twelve months of actual payments and frequencies for services billed to Medicare in 1991 were used as baseline data. It was assumed there would be no change in volume of services, billing practices, or staffing patterns. It was estimated that upon full implementation of the MFS, the anesthesiology department that was studied would lose $244,000 (13%) under Scenario 1 and $945,000 (51%) under Scenario 2. There is a full transition to final fee schedule rates in Year 1 of the MFS transition under Scenario 1, whereas there are additional incremental losses in each successive year under Scenario 2. This study shows that HCFA's future policy decisions with regard to anesthesiology reimbursement will have substantial financial consequences for many practicing anesthesiologists.

Academic Medical Centers↗

The effects of preferred provider options in fee-for-service plans on use of outpatient mental health services by three employee groups.

Descriptions of how preferred provider organizations (PPOs), offered as options to employees enrolled in fee-for-service plans, affected use of outpatient mental health services are provided. Data are from the RAND Preferred Provider Organization Study, which has a sample of employees who enrolled in fee-for-service plans 1 year before and 2 years after a PPO option was offered by three employers in two U.S. sites. To study effects of the optional PPOs on access to mental health care, usage patterns among those who initially stated that they did or did not intend to use PPO providers were examined. By the end of the second post-PPO year, employees had a similar annual probability of having an outpatient mental health visit whether or not they initially intended to use PPO providers. However, during the first post-PPO year, there was a decrease in the probability of use for those initially intending to use PPO providers, relative to those who did not intend to do so, among employees who had no regular medical provider. To study effects of the PPO option on usage levels of mental health care services, users of mental health services who primarily visited PPO were compared with those who primarily visited non-PPO providers. Users who visited PPO providers had significantly lower levels of use, controlling for other factors, than those who primarily visited non-PPO providers. Therefore, despite lower cost sharing for services received from PPO providers, the PPO option appeared to lower outpatient mental health care costs while having no more than a transient effect on access. This study did not evaluate mental health outcomes.

Adult↗

Understanding the Medicare Fee Schedule and its impact on physicians under the final rule.

On January 1, 1992, the Medicare program unveiled a new method for paying physicians known as the Medicare Fee Schedule (MFS). The new fee schedule is a complex system of administrative pricing based on the resource inputs used in producing physician services. The MFS consists of three parts: 1) a Relative Value Scale, which assigns to each medical service a value relative to all other services; 2) a conversion factor, which converts the relative values into dollars; and 3) a geographic adjustment factor, which adjusts payments based on geographic differences in the cost of producing physician services. In this article, the following are addressed: how the relative values were determined; how the geographic adjustment factor was constructed; and how the conversion factor was calculated. In addition, balance billing limits and the Medicare Volume Performance Standards (MVPS) are described. Computer simulations of the impact of the MFS on payments to physicians are presented. The authors found that the MFS will 1) redistribute payments away from surgeons, radiologists, and other procedure-based specialties toward the primary care specialties; 2) redistribute payments away from urban areas toward rural areas; and 3) redistribute payments away from invasive procedures and diagnostic tests toward evaluation and management services. The authors conclude with a discussion of the future refinements of the MFS, its applicability to other payers, and whether it will accomplish its intended purposes.

Economics, Medical↗

Severity of depression in prepaid and fee-for-service general medical and mental health specialty practices.

This study compares severity of depression for patients of general medical clinicians, psychiatrists, and nonphysician therapists receiving prepaid or fee-for-service care. Cross-sectional severity comparisons were conducted among 715 outpatients with current major depression or dysthymia, by independent assessment. Severity was assessed by counts of current and lifetime depressive symptoms, prognostic and treatment response indicators, and global measures of psychological and physical sickness. Patients of psychiatrists were the most psychologically ill, patients of nonphysician therapists were intermediate, and general medical patients were least ill; but even in the general medical sector, depression severity was at least ill; but even in the general medical sector, depression severity was at least moderate. No differences in global physical sickness by specialty remained after demographic adjustment. General medical patients whose depression had been detected were only slightly sicker than undetected cases. Type of payment was not consistently related to either psychological or physical aspects of sickness, and payment did not interact with specialty. Mental health specialists, especially psychiatrists, encountered more severely depressed patients, but patients in all sectors were sick enough to warrant treatment. Even undetected patients in the general medical sector were relatively sick, raising questions about gatekeeper policies. There was no evidence of a greater severity gradient by specialty in prepaid care. Because payment was unrelated to severity, treatment implications are similar under prepaid and fee-for-service care. Implications for clinical practice, public policy, and outcomes research design are discussed.

Adult↗

Direct health care costs of 4 common skin ulcers in New Mexico Medicaid fee-for-service patients.

OBJECTIVE: To determine health care costs associated with pressure ulcers, ulcers of the lower limbs, other chronic ulcers, and venous leg ulcers from the New Mexico Medicaid fee-for-service program perspective. DESIGN: Retrospective analysis of claims database MAIN OUTCOME MEASURES: Physician visit, hospital, and prescription costs were determined for New Mexico Medicaid patients with a primary and/or secondary diagnosis of 1 of 4 identified categories of skin ulcers from January 1, 1994, through December 31, 1998. Costs were determined in terms of mean and median annual cost per patient and total costs per year. Zero dollar claims were included within the cost calculations. All costs are expressed in 2000-dollar values. MAIN RESULTS: Mean annual physician visit costs per patient ranged from $71 (standard deviation [SD] = $60) for venous leg ulcers in 1998 to $520 (SD = $1228) for pressure ulcers in 1996. Mean annual hospital costs per patient ranged from $266 (SD = $348) for other chronic ulcers in 1998 to $15,760 (SD = $30,706) for pressure ulcers in 1998. Mean annual prescription costs per patient ranged from $145 (SD = $282) for other chronic ulcers in 1998 to $654 (SD = $1488) for pressure ulcers in 1994. CONCLUSION: The New Mexico Medicaid fee-for-service system incurred a total cost of approximately $11.6 million (in 2000 dollars) from 1994 through 1998 for the treatment of the 4 categories of skin ulcers studied. The data showed that the majority of wounds were coded as pressure ulcers, which had the highest associated costs.

Chronic Disease↗

Long-term experience providing antiretroviral drugs in a fee-for-service HIV clinic in Uganda: evidence of extended virologic and CD4+ cell count responses.

OBJECTIVE: To describe the long-term experience of providing anti-retroviral (ARV) therapy, including CD4 cell count and virologic response, at St. Francis Hospital, Nsambya, Uganda. METHODS: The HIV clinic established in 1998 is a fee-for-service model where patients pay for ARVs. The care of patients who started ARVs from August 1, 1998 until October 31, 2000 was evaluated through December 31, 2002. Data were collected at the HIV clinic on standardized clinical forms. These patients had free CD4 cell count and viral load testing performed at times determined by the physician. All persons who had >/=1 CD4 cell count or viral load done >/=90 days after starting therapy were evaluated. RESULTS: Three hundred twenty-one patients (49% women, 66% ARV naive, median age = 38 years, median CD4 cell count = 79 cells/mm, and median viral load = 249,489 copies/mL) attended the HIV clinic. Two hundred sixty-three (82%) patients returned at least once after the initial visit, of whom 54 (21%) had an interruption in therapy for >1 year. One hundred thirty-five patients were in care in 2002, 69 were known to have died (9 of whom died in 2002), and 68 were lost to follow-up. The probability of remaining alive and in care at 1 year was 0.56 (95% confidence interval [CI]: 0.50-0.61), 0.46 (95% CI: 0.41-0.51) at 2 years, 0.40 (95% CI: 0.34-0.45) at 3 years, and 0.35 (95% CI: 0.29-0.41) at 4 years. In an on-treatment analysis, the median CD4 cell count increase during year 1 was +55 cells/mm, +112 cells/mm during year 2, +142 cells/mm during year 3, and +131 cells/mm during year 4. The median log viral load change from baseline during year 1 was -1.4 copies/mL, -1.32 copies/mL during year 2, -1.9 copies/mL during year 3, and -1.51 copies/mL during year 4. CONCLUSIONS: This fee-for-service HIV clinic providing ARV treatment has successfully operated and managed patients for more than 4 years. Those who survived and remained on therapy derived long-term virologic and immunologic responses to ARV drugs in a manner similar to that observed in industrialized countries. Strategies to reduce the financial burden and other barriers to uninterrupted care as well as incentives to increase such practice models should be further explored in the African context.

Anti-HIV Agents↗

Fee-for-service revenue for school mental health through a partnership with an outpatient mental health center.

School mental health programs are increasingly prominent in the United States and in other countries, but funding remains tentative. This article describes a partnership between a school mental health program and an outpatient mental health center, and considers the larger goal of promoting sustainability and increasing revenue. Issues related to using fee-for-service revenue to support school mental health are explored, and strategies for promoting effective partnerships are discussed. Recommendations for programs facing the challenge of incorporating fee-for-service activities into their current model of service provision are provided.

Adolescent↗

The use of relative value studies in the determination of veterinary fees.

This paper discusses the methods which veterinarians in Australia use to calculate their fees and charges. Problems associated with these methods and the tendency to undervalue the professional component of veterinary services are discussed. The paper introduces the concept of a relative value study of veterinary professional services within Australia and recommends the development of a relative value scale and conversion factors, based on appropriate resource cost accounting methodology, as a method to quantify veterinary professional service charges. A relative value scale is a table of "weights" that defines the relative value of procedures or services one to the other. A conversion factor is used to change the relative value unit to a dollar price and thus convert a relative value scale to a fee schedule. The Australian Veterinary Association is suggested as the most appropriate organisation to initiate and co-ordinate the research necessary for the development of these recommendations on a national basis.

Australia↗

Attitudes of psychiatric residents toward payment of psychotherapy fees.

A preliminary exploration of psychiatric residents' thinking on the subject of psychotherapy fees revealed a pattern of inconsistencies in attitudes and a divergence between attitudes and practice. The author discusses these findings in the light of theoretical considerations and the effect of such attitudes on clinic administration and patient treatment. He emphasizes education about and discussion of fees as important aspects of residency training.

Attitude of Health Personnel↗

Variations in mental health needs and fee-for-service reimbursement for physicians in Ontario.

OBJECTIVES: The study examined the match between mental health needs and physician fee-for-service reimbursements for mental health care within age and gender groups and health planning regions in Ontario, Canada. METHODS: Indicators of need (mental disorder, reported disability, and self-rated mental health) from an epidemiologic survey of 9,953 Ontario household residents were compared with per capita reimbursement rates derived from an administrative data set containing all fee-for-service expenditures for mental health care paid by the provincial health plan. RESULTS: Few gender differences were found in overall need, but need varied significantly by age. Those in greatest need were adolescent males and females, who had rates of need from two to four times higher than older respondents. Regional variations in need were less evident. By contrast, per capita reimbursement showed marked gender differences, with rates for women generally twice the rates for men. Considerable variations in reimbursement were also found across age groups; these variations did not match variations in need. Highly urbanized areas had per capita reimbursement rates between two and four times the rates for less populated areas. CONCLUSIONS: Despite Ontario's universal-access health care system, notable discrepancies between need and resource use are evident for males, adolescents, and residents of less urbanized areas. Solutions require a combination of public education, provider training, attention to physician availability and practice patterns, and continuous monitoring of how resources are allocated relative to need.

Adolescent↗

Assessing Medicaid recipient access and satisfaction. Fee-for-service, case management, and capitation.

Medicaid increasingly requires enrollment in managed care programs. This study assessed access to care, satisfaction with care, and appointment wait times during the transition from fee for service to managed care using three annual Medicaid recipient surveys. There was little evidence of dissatisfaction or poorer access among managed care recipients. Fee-for-service recipients, compared to primary care case management, reported greater general (91 vs. 78%, p < .01) and specialty care access (92 vs. 80%, p < .01). When appointments were required, adult HMO enrollees, compared to case management, had longer waits for routine care in the second (5.8 +/- 8.2 days vs. 4.0 +/- 6.6) and third surveys (5.5 +/- 6.9 days vs. 3.8 +/- 7.3); waits for other appointments did not consistently differ by program. There were no significant program differences in overall satisfaction. Findings are tempered by the potential for response bias and geographic confounding. Continued monitoring is crucial to assure that access and satisfaction remain high in Medicaid managed care.

Case Management↗