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The relationship of managed care to business, professional, and organizational aspects of radiology practices.

OBJECTIVE: We sought to determine the extent of managed care involvement among radiology practices of different types, locations, and sizes; the factors associated with differences in involvement; and the impact of managed care on professional, organizational, financial, and hospital-relations aspects of radiology practices. MATERIALS AND METHODS: A survey was mailed in 1999 to a sample of 970 radiology practices; completed, usable surveys were returned by 66% of the practices. Three indicators of managed care were used: a practice's percentage of managed care (HMOs plus preferred provider organizations), local area HMO penetration rate, and self-reported perceived effect of managed care. RESULTS: Percentage of managed care averaged 30% but was 40% for multispecialty groups. It was relatively high in large metropolitan areas, for practices with no hospital activity, and for practices with any owners who were not practice members. The three measures of managed care were only moderately correlated (correlation coefficient, 0.25-0.33). None of the managed care variables had a statistically significant effect on days provided for vacation and continuing medical education, promptness of payment, years required for practice ownership (partnership), and percentage of practice members who were owners. Higher percentage of managed care was associated with higher collection rates, whereas greater perceived impact of managed care had the opposite association. Two thirds of practices belonged to at least one managed care-related organization such as an independent practice association. Most radiology practices reported no involvement in the managed care negotiations of hospitals, which was true even when the hospital's negotiations included the radiologists' fees or when the practice determined its level of involvement. CONCLUSION: Many negative outcomes most feared by radiologists regarding the effect of managed care have not materialized. Perceptions of practices as to the effect of managed care seem to reflect negative aspects of their general situation, not only realities of managed care.

Attitude of Health Personnel↗

Rapid drop in infant blood lead levels during the transition to unleaded gasoline use in Santiago, Chile.

This study was conducted to relate blood lead levels in infants to changes in lead emissions in Santiago, Chile, a heavily polluted setting where leaded gasoline began to be replaced with unleaded gasoline in 1993. Over an 18-mo period, 422 infants had blood lead levels, cotinine, and iron status determined at 12 mo. Blood lead levels fell at an average rate of 0.5 microg/dl every 2 mo, from 8.3 to 5.9 microg/dl, as the city experienced a net fall of 30% in the quantity of leaded gasoline sold. Time progression, car ownership, serum cotinine, and type of housing were significantly associated with a blood lead level > or = 10 microg/dl. In this study, the authors demonstrated that infant blood lead levels, even if relatively low, can drop very rapidly in conjunction with decreases in environmental lead exposure.

Carcinogens↗

Hospital cost efficiency and system membership.

Using a recently developed taxonomy of hospital organizations, this paper estimates a stochastic frontier cost function to test for inefficiency differences among system hospitals having common strategic and/or structural characteristics. System hospitals that centralized around physician arrangements and insurance products display the smallest deviations from the least cost locus. This suggests efficiency benefits from organization of physician and insurance activities at the system level, with discretion over the array of service offerings left to individual members. Policymakers should be mindful of potential efficiency gains from hospital consolidations and be aware that common ownership alone may be too general a rubric for evaluating those gains usefully.

Decision Making, Organizational↗

Nonprofit health insurers: the story Wall Street doesn't tell.

For several years, Wall Street investment firms have campaigned for conversion of nonprofit health insurers to investor ownership, arguing that an infusion of equity capital is critical to insurers' survival. However, closer examination of the financial performance and capital position of not-for-profit health plans shows that: The lower operating margins reported by not-for-profit health plans very likely reflect the organizations' corporate missions to serve their communities by minimizing the cost of coverage and their ability to invest all gains back into the company for the future benefit of their customers. Their investor-owned counterparts must generate higher margins to give shareholders a return on their investment. Compared with investor-owned insurers, not-for-profit health plans use a significantly higher percentage of the customers' premium dollar to pay health care claims. A lower percentage goes for administrative expenses. Over the past 10 years, not-for-profit health plans have succeeded in using operational and investment gains to build and retain a strong capital position--stronger than that of investor-owned companies--while investing heavily in infrastructure, product development, and market growth.

Commerce↗

Organizational characteristics of solid-organ donor hospitals and nondonor hospitals.

CONTEXT: Efforts to increase organ donation include serious attempts in hospital settings, where unrealized donation potential exists. Research on hospital donation must include understanding organizational as well as patient-specific influences on the donation process. OBJECTIVE: To identify organizational characteristics that distinguish hospitals producing organ donations from those that do not, and to estimate the number of nondonor hospitals with donor potential. DESIGN: Data from the American Hospital Association's 1992 annual survey of hospitals were matched to Organ Procurement and Transplantation Network information from the United Network for Organ Sharing regarding the number of solid-organ donors in 1992. Hospitals with donation capability were identified, based on bed size and factors necessary to produce successful donor maintenance and organ recovery. Based on statistical analyses, organizational characteristics distinguishing donor hospitals from nondonor hospitals were identified. We also compared the number of donors and the number of donor hospitals in 1992 and 1996. SETTING: United States. RESULTS: Among all hospitals affiliated with the American Hospital Association (n = 5607), 1214 (22%) were identified as donor hospitals (> or = 1 donation in 1992). Of 2333 hospitals with procurement capability, 1268 (54%) produced no donors in 1992. Based on a multiple logistic regression model, donor hospitals differed from nondonor hospitals by hospital ownership, with municipally owned hospitals more likely and federally owned hospitals less likely to produce donation, compared with for-profit and not-for-profit hospitals. Other organizational characteristics associated with donor hospitals were level of trauma services, whether the hospital had a transplant surgery program or a hospital ethics committee, and whether it was located in the South Atlantic, Southwest Central, or Pacific regions of the United States. CONCLUSIONS: Among hospitals not currently producing organ donations, there is a sizable subgroup with donor potential. This area merits further attention.

American Hospital Association↗

A taxonomy of health networks and systems: bringing order out of chaos.

OBJECTIVE: To use existing theory and data for empirical development of a taxonomy that identifies clusters of organizations sharing common strategic/structural features. DATA SOURCES: Data from the 1994 and 1995 American Hospital Association Annual Surveys, which provide extensive data on hospital involvement in hospital-led health networks and systems. STUDY DESIGN: Theories of organization behavior and industrial organization economics were used to identify three strategic/structural dimensions: differentiation, which refers to the number of different products/services along a healthcare continuum; integration, which refers to mechanisms used to achieve unity of effort across organizational components; and centralization, which relates to the extent to which activities take place at centralized versus dispersed locations. These dimensions were applied to three components of the health service/product continuum: hospital services, physician arrangements, and provider-based insurance activities. DATA EXTRACTION METHODS: We identified 295 health systems and 274 health networks across the United States in 1994, and 297 health systems and 306 health networks in 1995 using AHA data. Empirical measures aggregated individual hospital data to the health network and system level. PRINCIPAL FINDINGS: We identified a reliable, internally valid, and stable four-cluster solution for health networks and a five-cluster solution for health systems. We found that differentiation and centralization were particularly important in distinguishing unique clusters of organizations. High differentiation typically occurred with low centralization, which suggests that a broader scope of activity is more difficult to centrally coordinate. Integration was also important, but we found that health networks and systems typically engaged in both ownership-based and contractual-based integration or they were not integrated at all. CONCLUSIONS: Overall, we were able to classify approximately 70 percent of hospital-led health networks and 90 percent of hospital-led health systems into well-defined organizational clusters. Given the widespread perception that organizational change in healthcare has been chaotic, our research suggests that important and meaningful similarities exist across many evolving organizations. The resulting taxonomy provides a new lexicon for researchers, policymakers, and healthcare executives for characterizing key strategic and structural features of evolving organizations. The taxonomy also provides a framework for future inquiry about the relationships between organizational strategy, structure, and performance, and for assessing policy issues, such as Medicare Provider Sponsored Organizations, antitrust, and insurance regulation.

American Hospital Association↗

Rural hospital survival: an analysis of facilities and services correlated with risk of closure.

To test whether the facilities and services offered by rural hospitals can put them at risk of closure or protect against it, this study compares U.S. rural community hospitals that closed during the period 1980-1987, with a matched set of hospitals that remained open. Utilizing epidemiologic matched case-control methods and controlling for type of ownership, we found that (1) physical therapy, respiratory therapy, intensive care unit, computed tomography scanner, hospital auxiliary, and diagnostic radioisotope were negatively correlated with closure (i.e., had a protective effect); (2) the facilities and services correlated with risk of closure differed significantly between the pre-PPS (1980-1983) and post-PPS (1984-1987) periods; and (3) the presence of a skilled nursing or other long-term care unit was a significant risk factor during the period 1984-1987. Implications of these findings for hospital survival strategies and rural health care delivery under PPS are discussed.

Ancillary Services, Hospital↗

Stark reality.

On Feb. 9, 1989, amid considerable attention in the healthcare industry, Rep. Fortney H. ("Pete") Stark, D-CA, introduced in Congress the Ethics in Patient Referrals Act (H.R. 939). At the time, the so-called Stark bill would have effectively prohibited physicians from referring Medicare patients to any healthcare entity in which they had a financial interest, including hospitals, hospital departments, and physician-hospital joint ventures. The bill that emerged and was signed into law months later is but a shadow of its former self: The prohibition against physician referrals is directed only at certain clinical laboratories and certain relationships between physicians and the laboratories. Hospitals and physicians may be overly optimistic about the results of this most recent incursion into physician ownership. This was not the first government intrusion into physicians' financial affairs, and it is not likely to be the last. Congress will no doubt continue to focus attention on physicians and hospitals that seek revenues through joint investments in healthcare providers. In fact, Congress has already put referring physicians on notice, saying that if the Government Accounting Office finds evidence of inappropriate referrals, or increased Medicare costs, "it would be the intent of the relevant Committees to consider legislation banning referrals at the earliest possible date."

Crime↗

Hospital chain's LBO reads like textbook case.

Health Management Associates' leveraged buyout was done during the swirling and headlong LBO mania of the 1980s, but this one was structured to keep the company from being crushed under the weight of its debt. That cool calculation is paying off in cool millions for management and institutional investors as a return to public ownership reaps stock-price dividends.

Florida↗

The way to win in cross-border alliances.

Global competition has paved the way to new corporate combinations--and opened up new pitfalls along the way. In "The Way to Win in Cross-Border Alliances," Joel Bleeke and David Ernst offer the unconventional lessons of their study of 49 cross-border alliances. For example, alliances between a weak and a strong company usually don't work; but fifty-fifty ownership of joint ventures actually improves decision making.

Advertising↗

Does privatization serve the public interest?

"Does Privatization Serve the Public Interest?" ask John B. Goodman and Gary W. Loveman. Supporters of privatization claim that it will bring more efficiency and better quality. Critics, however, argue that other values--the broader public interest--must be accounted for. The authors draw a valuable lesson from the debate over corporate takeovers: the form of ownership is less important than the establishment of managerial accountability.

Economic Competition↗

'States lag in regulating self referrals.'.

Physician ownership, which is getting plenty of attention from federal regulators and lawmakers, remains a largely unregulated activity at the state level, according to a study obtained exclusively by Modern Healthcare. Even in states with statutes dealing with such issues, the language of the laws often is vague and enforcement is lacking. But some states have enacted tough legislation, and more are likely to follow.

Ownership↗

Medicare program; reporting requirements for financial relationships between physicians and health care entities that furnish selected items and services--HCFA. Interim final rule with comment period.

This interim final rule sets forth reporting requirements under the Medicare program for the submission by certain health care entities of information about their financial relationships with physicians. It implements section 1877(f) of the Social Security Act, which includes the requirements that entities furnishing Medicare covered clinical laboratory services must provide HCFA with information concerning their ownership arrangements. It also provides notice of HCFA's decision to waive the requirements of section 1877(f) with respect to certain entities that do not furnish clinical laboratory services.

Ambulances↗

Organizational and environmental determinants of hospital strategy.

This study focuses on the relationship between the business strategy of acute care hospitals and several organizational and environmental characteristics. Business strategy is assessed using the Miles and Snow (1978) typology. The organizational characteristics examined are size, system membership, type of ownership, and case-mix severity. The environmental characteristics examined are those of the local environment, which includes general economic factors and measures of market structure. General economic factors include family income, unemployment rate, percent of population over 65, and ratio of physicians to general population. The measures of market structure include the Herfindahl index and each hospital's individual market share. The results of our analysis using multiple regression indicate that organizational characteristics are more likely than environmental factors to influence the business strategy of hospitals. Specifically, hospitals that are relatively small or operate independently are less likely than other hospitals to follow a proactive strategic orientation.

Chi-Square Distribution↗

Determinants of capital structure.

This study analyzes the determinants of hospital capital structure in a new market setting that are created by the financial pressures of prospective payment and the intense price competition among hospitals. Using California data, the study found hospital system affiliation, bed size, growth rate in revenues, operating risk, and asset structure affected both short- and long-term debt borrowings. In addition, percentage of uncompensated care, profitability, and payer mix influenced short-term borrowings while market conditions and ownership affected long-term borrowings. Most significant of all is the finding that smaller hospitals tend to borrow more, possibly because they cannot generate funds internally.

California↗

Administrative complement and managerial efficiency in South Carolina hospitals.

This article examines the infrastructure and efficiency of administrative personnel employed by hospitals in South Carolina. The analysis suggests that variation in the administrative complement and the efficiency of hospital administrators is related to the scale of operations and related organizational complexity, the occupancy rate, ownership, and affiliation with multihospital systems. The results of the study also indicate that the administrative complement should be regarded as a resource that results in a discretionary rather than a committed cost and might be altered to increase productivity and improve profitability.

Bed Occupancy↗

Medicare and Medicaid programs; revaluation of assets--HCFA. Final rule.

This final rule revises the Medicare and Medicaid regulations that are affected by section 2314 of the Deficit Reduction Act of 1984 and sections 9110 and 9509 of the Consolidation Omnibus Budget Reconciliation Act of 1985. Those provisions amended sections 1861(v)(1) and 1902(a)(13) of the Social Security Act. This rule describes new limitations on the valuation of assets acquired as the result of changes in ownership occurring on or after July 18, 1984. These changes affect hospitals and skilled nursing facilities under the Medicare program and hospitals, nursing facilities, and intermediate care facilities for the mentally retarded under the Medicaid program.

Financial Management, Hospital↗

The Blues at a crossroads.

The nation's Blue Cross and Blue Shield plans may be facing the greatest challenges in the association's 60-year history with the prospects of radical changes in the nation's healthcare system. The Blues, still the nation's largest insurer despite consolidation and growing competition, are dealing with such thorny issues as negative publicity over the operation of some plans and disputes over public ownership of Blues affiliates.

Bankruptcy↗