Resource allocation nationally.
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Cost Allocation↗
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Ambulatory patient classifications and the regressive nature of Medicare reform: is the reduction in outpatient health care reimbursement worth the price?
PURPOSE: To evaluate the impact of the proposed Ambulatory Patient Classification (APC) system on reimbursement for hospital outpatient Medicare procedures at the Massachusetts General Hospital (MGH) Department of Radiation Oncology. METHODS AND MATERIALS: Treatment and cost data for the MGH Department of Radiation Oncology for the fiscal year 1997 were analyzed. This represented 66,981 technical procedures and 41 CPT-4 codes. The cost of each procedure was calculated by allocating departmental costs to the relative value units (RVUs) for each procedure according to accepted accounting principles. Net reimbursement for each CPT-4 procedure was then calculated by subtracting its cost from the allowed 1998 Boston area Medicare reimbursement or from the proposed Boston area APC reimbursement. The impact of the proposed APC reimbursement system on changes in reimbursement per procedure and on volume-adjusted changes in overall net reimbursements per procedure was determined. RESULTS: Although the overall effect of APCs on volume-adjusted net reimbursements for Medicare patients was projected to be budget-neutral, treatment planning revenues would have decreased by 514% and treatment delivery revenues would have increased by 151%. Net reimbursements for less complicated courses of treatment would have increased while those for treatment courses requiring more complicated or more frequent treatment planning would have decreased. Net reimbursements for a typical prostate interstitial implant and a three-treatment high-dose-rate intracavitary application would have decreased by 481% and 632%, respectively. CONCLUSION: The financial incentives designed into the proposed APC reimbursement structure could lead to compromises in currently accepted standards of care, and may make it increasingly difficult for academic institutions to continue to fulfill their missions of research and service to their communities. The ability of many smaller, low patient volume, high Medicare mix hospital-based radiation oncology departments to continue to deliver their current level of care could be compromised. APC reform may carry monetary and opportunity costs which far outweigh its apparent savings. As payment systems continue to place pressure on operating margins, it becomes even more critical that both academic and community radiation oncology practices know the cost of providing services.
Ambulatory Care↗
Assessing the strategic gap: the first step in resource allocation.
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Cost Allocation↗
The economic cost of illness: fiscal 1975.
In 1963, Rice estimated the costs of illness and then allocated these costs by disease. She and Cooper in 1972 updated the original estimates and developed a more sophisticated methodological approach. This paper updates further the costs of illness to 1975 and presents further methodological changes. Analysis of the direct and indirect costs of illness for 1975 reveals that the upward trend into total costs continued, reaching $264 billion. The indirect costs are loss of earnings due to morbidity or premature mortality estimated at various discount rates allocated into 18 categories by disease. The direct costs include such payments as those made for hospital care, physician services, and drugs which are allocated by disease and unallocated costs such as construction and research. The proportion of total costs due to premature mortality were found to drop slightly from 1972 to 1975, while the morbidity share increased slightly. Direct costs account for approximately the same share of total illness in 1975 as in 1972. The proportion of total costs accounted for by direct costs varies directly with the discount rate selected, with the direct costs accounting for 50 per cent of the total at the 10 per cent discount rates and 37 per cent at 2.5 per cent rate. The proportion due to morbidity costs also varies directly with the discount rate, although the changes are small. There is an inverse relationship between the share for premature mortality costs and discount rate.
Direct Service Costs↗
Methods of evaluating dental care costs in the Swedish public dental health care sector.
Twenty-six Swedish dental health care clinics participating in the intervention study "Evaluation of caries preventive measures" have been analysed with focus on costs, with the aim of demonstrating techniques suitable for evaluating direct dental care costs and also finding out whether charges are acceptable as a proxy for real costs. Three different approaches to calculating unit costs are discussed: average treatment time cost and two methods of different allocation of overhead cost. Average treatment time cost shows treatment time cost regardless of who (dentist, dental hygienist or nurse) provides the dental care. The other two methods reflect both the differences of treatment costs depending on practitioners' skill level and competence (salary) and the methods of handling overhead cost allocation. Our conclusions are that the proposed methods seem useful for evaluating costs in cost-effectiveness and cost-benefit analysis. The alternative to average treatment time cost or unit time cost depends on what data is available and the perspective of the analysis. This study also concludes that charges are not sufficient as an alternative to a more detailed cost evaluation, at least not in Swedish public dental health care, since charges do not cover costs.
Clinical Competence↗
Technical issues in allocation formula design.
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Cost Allocation↗
Reimbursement under DRGs: implementation in New Jersey.
This paper addresses the general concept of incorporating DRGs (Diagnosis Related Groups) into health care reimbursement systems and specifically addresses the problems and issues encountered in implementing a DRG-based hospital reimbursement system in the State of New Jersey during the period 1978-1982. We will frame the problem by briefly discussing the traditional problem with cost-based reimbursement systems, the objective and general methodology of patient classification, and the use of DRGs in hospital reimbursement. We then explore in some detail each phase of the process of constructing a workable prospective case-mix reimbursement system as it occurred in the State of New Jersey, discussing in particular the major reimbursement policy issues, their resolution, and impact on the system as a whole. Specific concerns addressed are patient data requirements, financial and statistical data requirements, the allocation of costs to patients, the development of prospective rates, the actual mechanics of payment, and current developments in New Jersey.
Cost Allocation↗
Definitions and methods of cost assessment: an intensivist's guide. ESICM section on health research and outcome working group on cost effectiveness.
OBJECTIVE: To define the different types of costs incurred in the care of critically ill patients and to describe some of the most commonly used methods for measuring and allocating these costs. DESIGN: Literature review. Definitions for opportunity, direct and indirect, fixed, variable, marginal, and total costs are described and interpreted in the context of the critical care setting. Two main methods of costing are described: the 'top-down' and 'bottom-up' methods together with a number of cost proxies, such as the use of weighted hospital days, diagnosis-related groups, severity and activity scores, and effective costs per survivor. CONCLUSIONS: The assessment and allocation of costs to critically ill patients is complex and as a result of the different definitions and methods used, meaningful comparisons between studies are plagued with difficulty. When undertaking a study looking to measure costs, it is important to state: (a) the aim of the cost assessment study; (b) the perspective (point of view); (c) the type of costs that need to be measured; and (d) the time span of assessment. By being explicit about the rationale of the study and the methods used, it is hoped that the results of economic evaluations will be better understood, and hence implemented within the critical care setting.
Cost Allocation↗
The cost effectiveness of including pencils and erasers with self-completion epidemiological questionnaires.
It is cheap to process epidemiological data from optical mark read (OMR) questionnaires. Respondents should use a pencil to complete OMR questionnaires, but many will not unless these are supplied. Sending pencils and erasers is expensive. Does sending pencils and erasers increase the response rate as cost-effectively as sending reminders, or does this decrease the error rate and offset data checking costs? We mailed 300 smokers and half were randomised to receive pencils and erasers. The relative risk (95% confidence intervals) for the response rate for the pencil group relative to the non-pencil group was 0.77 (0.46-1.29) and for the error rate was 1.31 (0.78-2.21). Sending pencils and erasers was not cost-effective in sensitivity analysis with any response rate or using the confidence intervals. Including pencils with mailed epidemiological questionnaires probably has no benefit and any plausible benefit does not offset the costs of sending pencils and erasers.
Cost Allocation↗
Treatment costs, equilibrium, and the allocation of patients to therapy alternatives.
This paper addresses the problem of increasing costs (or decreasing returns) in the treatment of patients within health care systems. We examine the implications of such a situation for (1) the allocation of patients to alternative drug therapies within a disease area; and (2) the proportions of patients being treated within the disease area to the total patient population as a function of the equilibrium conditions for maximized health care outcomes, given alternative assumptions about the existence of budget constraints on the resources allocated to the disease area. The reason for considering these issues (in this case, from a purely theoretical perspective) is that such a model and the assumptions that drive it stand in marked contrast to those underlying (implicitly if not explicitly) the traditional approach to cost-effectiveness modeling. In traditional cost-effectiveness analysis, the assumption is that costs and outcomes exhibit constant returns to scale and that the process of patient selection and the characteristics of the treating population need not be taken into account. However, our analysis demonstrates that once the assumption of constant returns in abandoned, any assessment of the net impact of therapeutic interventions can be made only within an equilibrium, or comparative static, framework that is subject to budget constraints and in which the cost functions that drive patterns of switching between therapies are specified. Under such conditions, the traditional, clinical-trial-based notion of cost-effectiveness loses all meaning.
Complementary Therapies↗
Economic evaluation of prenatal diagnosis: a methodological review.
This paper discusses the role of economic evaluation in prenatal diagnosis. As the availability of new and improved techniques of prenatal diagnosis increases, so does the relevance of economic evaluation. The various methods of economic evaluation are discussed in the context of amniocentesis and chorionic villus sampling. It is argued that in view of the potentially wide range of benefits from prenatal diagnosis, more sophisticated measures of benefit should be incorporated into economic evaluations. Further development of utility-based measures and monetary valuation is suggested.
Adult↗
Resource utilization and cost of care for rheumatoid arthritis and osteoarthritis in a managed care setting: the importance of drug and surgery costs.
OBJECTIVE: To describe the frequency and costs of medical services for patients with osteoarthritis (OA) or rheumatoid arthritis (RA) in a managed care setting. METHODS: Individual utilization records of medical and pharmacy services for OA and RA patients were obtained from a group-model health maintenance organization (HMO). Estimates were made for costs of drugs and medical services for arthritis from July 1, 1993 to June 30, 1994 using Medicare reimbursement schedules and average wholesale drug prices. Calculated rates for each population were expressed as counts of events or as dollars per person-year. RESULTS: The average individual cost rate of arthritis-related care for 365 RA patients was $2,162 per year, and the total cost of RA care to the HMO was $703,053. Prescription medications accounted for 62% ($436,440) of the total cost of RA care, while ambulatory care accounted for 21% ($150,938), and hospital visits accounted for 16% ($115,674). With regard to 10,101 OA patients, the average individual cost rate was $543 per year, and total cost to the HMO was $4,728,425. Hospital care accounted for 46% ($2,170,890) of the total cost of OA care, medications accounted for 32% ($1,509,637), and ambulatory care accounted for 22% ($1,047,898). CONCLUSION: RA care, in the setting of this study, was characterized by intensive treatment, especially frequent use of medications that were delivered to most patients. Although the cost of RA care per patient was high, cost to the managed care provider was relatively low, owing to the rarity of RA. OA care tended to be infrequent, and the largest component of cost was hospital care for a small proportion of patients (5%). Owing to the greater prevalence of OA, care of OA was nearly 7 times more costly to the managed care provider than was care of RA.
Aged↗
A cost-minimisation study of alternative discharge policies after hip fracture repair.
It is widely assumed that health care costs can be reduced considerably by providing care in appropriate health care institutions without unnecessary technological overhead. This assumption has been tested in a prospective study. Conventional discharge after hip fracture surgery was compared with an early discharge policy in which patients were discharged to a nursing home with specialised facilities for rehabilitation. We compared costs for both strategies from a societal perspective, using comprehensive and detailed data on type of residence and all kinds of medical consumption during a 4-month follow-up period. As expected, early discharge reduced the hospital stay (with 13 days, p=0.001). More patients were discharged to a nursing home (76% versus 53%). Total medical costs during follow-up were reduced from an average of euro;15338 to euro;14281, representing relatively small and not significant savings (p=0.3). There are two explanations for this unexpected result. First, costs incurred by hip fracture patients were relatively less while in hospital. Hence, nursing home costs almost equalled hospital costs per admission day. Second, compared with the conventionally discharged group early discharged patients were subjected to more medical procedures during the first post-operative days. We conclude that: (1). early discharge shifted rather than reduced costs; (2). the details of costing have a major influence on the cost-effectiveness of alternative discharge policies.
Aftercare↗
Accounting for the cost of scaling-up health interventions.
Recent studies such as the Commission on Macroeconomics and Health have highlighted the need for expanding the coverage of services for HIV/AIDS, malaria, tuberculosis, immunisations and other diseases. In order for policy makers to plan for these changes, they need to analyse the change in costs when interventions are 'scaled-up' to cover greater percentages of the population. Previous studies suggest that applying current unit costs to an entire population can misconstrue the true costs of an intervention. This study presents the methodology used in WHO-CHOICE's generalised cost effectiveness analysis, which includes non-linear cost functions for health centres, transportation and supervision costs, as well as the presence of fixed costs of establishing a health infrastructure. Results show changing marginal costs as predicted by economic theory.
Africa↗
Experts' agreement on the relative effectiveness of 29 smoking reduction strategies.
BACKGROUND: Smoking is associated with a large burden of illness in both developed and developing countries. Effective prevention of the uptake of smoking and achieving high rates of smoking cessation are essential to significantly reducing this problem. Therefore, researchers have sought to identify effective smoking reduction strategies which might be implemented in the community. Despite this wealth of research, making choices from among the available strategies with demonstrated effectiveness remains a difficult task. METHODS: The study aimed to explore the level of agreement among experts on the perceived relative effectiveness and cost effectiveness of 29 smoking reduction strategies in a given environment. Experts were selected at random from tobacco control organizations in Australia. Fifty experts completed a mailed questionnaire. RESULTS: It was found that there was little agreement among the experts regarding the perceived relative effectiveness and cost effectiveness of 29 smoking reduction strategies. CONCLUSIONS: It was concluded that the results suggest that experts may not be able to provide clear and consistent direction to health organizations on how best to reduce smoking rates. This is a concern given the current need for an effective, well-targeted worldwide attack on tobacco-related mortality and morbidity.
Australia↗
How to cost and fund an infection control programme.
Infection control (IC) services in the United Kingdom are provided as part of the microbiology services and therefore they have not, to date, been costed separately. This paper addresses the cost of providing the service, the savings that accrue from the IC policies in a hospital and, finally, the cost of infective episodes and outbreaks. The point of the exercise is to enable readers to cost their own services and separate the IC and microbiology budgets while maintaining the provision of service under one department.
Budgets↗
Reimbursement of biotherapy: present status, future directions--perspectives of the office-based oncology nurse.
Economic forces are stimulating cost sensitivity and the need for clinical efficiency in medicine. The federal government has led the way with Medicare reform, and cost-containment efforts are evident in all health care payer programs. More and more, the office-based oncology nurse is involved in reimbursement issues as both a colleague and a patient advocate. Creative solutions to the challenges of reimbursement require knowledge of the issues, familiarity with patient-specific therapies, and recognition of unique cost and billing issues. Biologic agents frequently used in office-based oncology practice are easy targets for reimbursement denials because of regulations against their investigational status, "off-label" use, method of administration, and relatively high cost. Such agents include interferon, erythropoietin (EPO), granulocyte and granulocyte-macrophage colony-stimulating factors (G-CSF and GM-CSF, respectively), and interleukin-2 (IL-2). Reimbursement decisions are often characterized by inconsistency and uncertainty, and rulings are based not only on law, but also on interpretation. The need for clarification often opens a window for negotiation for the complex reimbursement issues associated with biotherapy. In addition to thoroughly determining cost and accurately assigning appropriate Current Procedural Terminology (CPT) codes, office-based oncology nurses can pursue various strategies to help their patients and practices obtain reimbursement of biotherapy. Chief among these is educating third-party payers on the appropriateness and necessity of newer treatment modalities. In individual cases, documentation of the scientific data, clinical outcomes, and cost benefits supporting a treatment decision almost always gains reimbursement.(ABSTRACT TRUNCATED AT 250 WORDS)
Cost Allocation↗
Economies of scale in non-revenue producing cost centers: implications for hospital mergers.
This paper uses semiparametric methods to estimate the magnitude of economies of scale in 14 non-revenue producing cost centers in hospitals. There are substantial economies of scale in small hospitals, but economies are exhausted in hospitals with over 10,000 discharges annually. In recent hospital mergers challenged by federal antitrust agencies, one or both hospitals had over 10,000 discharges, suggesting that efficiency gains in non-revenue producing cost centers will be small, and could easily be offset by nominal price increases.
Antitrust Laws↗