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PubMed1995

Casemix: the building blocks.

This paper distinguishes three separate ways in which casemix measurement serves as a foundation for hospital and health system reform. At the hospital level, diagnosis related groups provide a means of describing kinds of acute inpatient care which in turn facilitates utilisation review activities essential to modern clinical and financial management. At the system level, casemix adjusters such as diagnosis related groups provide the basis for comparisons of productive efficiency across institutions, and reduce the risk of adverse funder reactions to higher per case costs which are attributable to differences in casemix. States are increasingly using casemix as the basis for funding hospitals in order to reduce non-casemix related differences. Finally, health reform experiments in using market-like mechanisms (such as managed competition, purchaser-provider split) require at a minimum that the product purchased be precisely specified, and that clinical risks of cost overruns be equalised amongst insurers or providers.

Australia↗
PubMed2005

Combining DRGs and per diem payments in the private sector: the Equitable Payment Model.

The many types of payment models used in the Australian private sector are reviewed. Their features are compared and contrasted to those desirable in an optimal private sector payment model. The EPM(TM) (Equitable Payment Model) is discussed and its consistency with the desirable features of an optimal private sector payment model outlined. These include being based on a robust classification system, nationally benchmarked length of stay (LOS) results, nationally benchmarked relative cost and encouraging continual improvement in efficiency to the benefit of both health funds and private hospitals. The advantages in the context of the private sector of EPM(TM) being a per diem model, albeit very different to current per diem models, are discussed. The advantages of EPM(TM) for hospitals and health funds are outlined.

Acute Disease↗
PubMed1988

The effects of regulation, competition, and ownership on mortality rates among hospital inpatients.

We examined the influence of the regulation of hospital rates, state certificate-of-need programs, competition, and hospital ownership on mortality rates among inpatients receiving care under Medicare for 16 selected clinical conditions that were studied as a group. Data were obtained from the records of 214,839 patients who received care in 981 hospitals in 45 states from July 1, 1983, through June 30, 1984. We found significant associations between higher mortality rates among inpatients and the stringency of state programs to review hospital rates (P less than or equal to 0.05), the stringency of certificate-of-need legislation (P less than or equal to 0.01), and the intensity of competition in the marketplace, as measured by enrollment in health maintenance organizations (P less than or equal to 0.05). Hospitals in the states with the most stringent review procedures for hospital rates had ratios of actual to predicted death rates that were 6 to 10 percent higher than those of hospitals in states with less stringent rate-review programs (P less than or equal to 0.001). Hospitals in the states with the most stringent procedures for reviewing applications for certificates of need had ratios of actual to predicted death rates that were 5 to 6 percent higher than those of hospitals in states with less stringent certificate-of-need procedures (P less than or equal to 0.05). There was no statistically significant association between mortality rates among inpatients and either the type of hospital ownership or the number of hospitals competing in the market area. Additional analyses, which examined alternative explanations for these findings, failed to change the results. These findings raise serious concerns about the welfare of patients who are admitted to hospitals in highly regulated areas and those admitted to hospitals in relatively competitive markets. They suggest that it is important to incorporate quality-assurance procedures and systems to monitor patients' outcomes into public and private programs designed to contain costs or promote competition, or both.

Aged↗
PubMed2002

Comparative approaches to pharmaceutical price regulation in the European Union.

AIM: To review pharmaceutical price regulation methods in countries of the European Union (EU), in terms of the anticipated impact of regulation on pharmaceutical expenditures and evidence of actual outcomes. METHOD: An extensive search was performed of medical and economic studies on regulatory interventions specifically targeting pharmaceutical prices in EU countries, published between January 1990 and April 2002. Both peer-reviewed and "gray" literature were systematically reviewed. RESULTS: Four principle approaches to pharmaceutical price regulation with some methodological differences were identified in EU countries, as follows: fixed pricing, cost-effectiveness pricing, profit controls, and reference pricing. Actual evidence of the impact of price regulation was limited in many of these countries. Cross-country comparisons suggested that limiting the rise of pharmaceutical prices did not equate to controlling the rise of pharmaceutical expenditures because of the volume effect of utilization. CONCLUSIONS: Supply-side regulation without the simultaneous use of demand-side incentives and volume controls does little to control the rise in pharmaceutical expenditures. The types of needed demand-side controls depend on the context of the individual country, on political priorities, and on the type of supply-side regulation in place.

Cost Control↗
PubMed2004

Pricing health services for purchasers--a review of methods and experiences.

This article reviews methodologies and international experience related to costing and pricing health services for health care purchasers. The main factors affecting price-setting methods are: (1) provider payment systems; (2) information available on actual costs, service volumes and outcomes; and (3) characteristics of providers and purchasers. These factors are strongly interrelated. Provider payment systems determine the unit of services to be priced. In order to minimize incentives for under- or over-utilization, the prices that purchasers pay for health care services should be related to the actual unit costs of services, but accurately calculating real unit costs is intensive in terms of resources and information. Pertinent provider characteristics influencing price-setting include provider autonomy, provider negotiating power, and the degree of competition. The article presents a series of examples that run through each of these three sets of factors. The examples are from Denmark, the UK, and Thailand (for capitation); Australia, Hungary, and the United States (for case-based payment); and Germany, Korea, and Taiwan (for fee-for-service payment mechanisms). From these experiences, the article concludes with appropriate lessons for low- and middle-income countries, where the principal constraint on the development of provider payments systems is the limited availability of information on costs, volumes, and patient characteristics.

Developed Countries↗
PubMed2000

Review of the literature on reference pricing.

This paper reviews the literature on reference pricing (RP) in pharmaceutical markets. The RP strategy for cost containment of expenditure on drugs is analyzed as part of the procurement mechanism. We review the existing literature and the state-of-the-art regarding RP by focusing on its economic effects. In particular, we consider: (1) the institutional context and problem-related factors which appear to underline the need to implement an RP strategy; i.e. its nature, characteristics and the sort of health care problems commonly addressed; (2) how RP operates in practice; that is, how third party-payers (the insurers/buyers) have established the RP systems existing on the international scene (i.e. information methods, monitoring procedures and legislative provisions); (3) the range of effects resulting from particular RP strategies (including effects on choice of appropriate pharmaceuticals, insurer savings, total drug expenditures, prices of referenced and non-referenced products and dynamic efficiency; (4) the market failures which an RP policy is supposed to address and the main advantages and drawbacks which emerge from an analysis of its effects. Results suggest that RP systems achieve better their postulated goals (1) if cost inflation in pharmaceuticals is due to high prices rather than to the excess of prescription rates, (2) when the larger is the existing difference in prices among equivalent drugs, and (3) more important is the actual market for generics.

Commerce↗
PubMed2002

Hospital charge exemptions for the poor in Shandong, China.

Rapid economic changes in China have produced soaring hospital charges, a breakdown of the old social health insurance system, a resulting crisis in hospital affordability and renewed interest in mechanisms for discounts or exemptions from hospital charges for the poor. Little is known, however, about how effective such systems are in practice. We studied nine public hospitals in Shandong Province that offer discount or exemption mechanisms for the poor. Methods included document review, key informant interviews, detailed review of financial records and focus group discussions. These hospitals receive little government subsidy and must support themselves almost entirely through user fees. Hospital managers saw discount mechanisms primarily as marketing tools and designed them to limit their cost. Only a small fraction of hospital services were eligible for discount, and these were usually low cost or low utilization items. Discounts were generally 10-50% for selected items with very few services exempted from charge. The total value of discounts granted was 1% or less of total hospital operating budgets. Correct identification of indigents was a major difficulty for hospitals. Only a minority of indigents received discounts, the process was sometimes arbitrary and some who received discounts were not really poor. Government policies requiring discounts for the poor were vague and not enforced. The exemption programmes studied do not provide effective protection from hospital charges for the poor. To be effective, exemption mechanisms would likely require both financing and regulation by the government as well as an accurate way to identify the poor.

China↗
PubMed1999

Effect of Japanese government policy on hospital pharmaceutical profit levels.

OBJECTIVES: Our main objective is to examine whether the Japanese government's pharmaceutical price reduction policy has reduced the size of pharmaceutical profit traditionally enjoyed by health care providers. We discuss alternative measures that the government could introduce in an attempt to control drug costs. METHODS: We review Japan's pharmaceutical reimbursement system. We then analyse published and unpublished data in an attempt to reach our main objective. Calculations are made from raw data, provided by the National Hospital Federation of Japan, in order to discover the extent to which hospitals are experiencing financial difficulties. RESULTS: Due to pharmaceutical product shifting by hospitals from older, less profitable drugs to newer, more profitable ones, drug profit margins may not have fallen to the extent that is often reported in the Japanese press. Furthermore, increased prescribing, possibly due to the ageing of the population, may have maintained the total drug profits of hospitals, to a large extent, despite any reduction in profit margins. CONCLUSIONS: Although drug price reduction policy has had some success in controlling pharmaceutical expenditure, there is little evidence to suggest that total pharmaceutical profits for the provider units have been seriously undermined, despite the prevalence of this notion among hospital administrators. Nevertheless, in order to promote the more efficient and effective manufacture and utilization of pharmaceuticals, the government should seriously consider alternative methods for controlling pharmaceutical costs.

Cost Control↗
PubMed2002

Low demand for substitutive voluntary health insurance in Germany.

AIM: To examine why the demand for substitutive voluntary health insurance in Germany is low. METHOD: A comparison of the benefits and costs of statutory and voluntary health insurance in Germany, based on a review of literature published in academic journals and books as well as gray literature. RESULTS: Employees in Germany with gross earnings over 40,500 Euros a year can choose to opt out of the statutory health insurance scheme (Gesetzliche Krankenversicherung, GKV) and purchase substitutive voluntary health insurance instead. Only a quarter of these employees and their dependents actually choose to opt out; the majority remain in the GKV. Substitutive voluntary health insurance does not generally afford greater benefits than the GKV in terms of services provided or choice of insurer and only affords marginal benefits in terms of choice of provider. It is also more expensive than the GKV for people with dependents, elderly people and people in poor health. Consequently, the choice to opt out and purchase substitutive voluntary health insurance is more likely to be taken by young, healthy or single people or couples with double incomes. CONCLUSION: Our analysis suggests that the demand for substitutive voluntary health insurance in Germany is low because the costs of opting out of the GKV are, in general, higher than the benefits afforded by purchasing substitutive voluntary health insurance. In the long term substitutive voluntary health insurance does not appear to provide good value for money when compared to the GKV, particularly for people with dependents, elderly people, and people in poor health.

Choice Behavior↗
PubMed1996

A critical review of the remuneration systems for pharmacists.

This paper provides a critical review of different systems of remunerations of pharmacists which exist in various countries: the percentage mark-up, the graduated mark-up, the capitation system, the fee for service system and mixed system. In these different systems, we refer to the various ways the provisions of pharmaceutical services are paid and reimbursed rather than how persons who physically deliver the services are paid. Therefore, the differences among various types of remuneration may not impact directly the level of responsibility and motivations of the various employees or owners in contact with the patient. The dispensing service remains the essential service of the pharmacist in all systems. However, according to the types of remuneration, the revenue of the pharmacist can be more or less linked to the volume and the price of drugs. Capitation systems, professional allowance and fees in particular can be used to shift the objective of the pharmacist towards increased professionalism. In each system, policy makers, when they can negotiate with the whole national profession, can use the remuneration system to achieve public policy objectives such as cost containment, better drug use, or provisions of large packages of services. This paper discusses to what extent each system can contribute to such objectives. In order to achieve public policy objectives, it may be time to shift the valuation of pharmaceutical services towards more safe and effective therapy instead of safe and effective drugs.

Canada↗
PubMedDate not supplied

Contracting in the NHS quasi-market.

This paper examines the development of contracting within the NHS on the basis of the data collected as part of a national survey of English District Health Authorities carried out in late 1994. The paper starts with a discussion of the background to contracting and its evolution during the first 4 years of the NHS internal market. The second section describes the methodology employed in the national survey. The third section presents the results of the survey alongside a discussion of their relevance in terms of the economics of contracting. This section shows the prevalence of different types of contracts and discusses the emergence of the most common type-sophisticated block contracts. Details are provided of how contracts deal with issues such as the measurement of activity, the pricing of projected activity and of activity variances (mainly at marginal cost), as well as the involvement of clinicians in contracting. Other topics explored include the management of extra contractual referrals, contracting for specialized services, arbitration arrangements, the purchaser efficiency index and contracts with the independent sector. The final section offers some concluding thoughts on the current state and future of contracting in the NHS.

Contract Services↗
PubMed1999

Varying health care provider objectives and cost-shifting: the case of retail pharmacy in the US.

In this paper we investigate the relationship between health care provider objectives, cost-shifting, and prices by exploring the relationship between state Medicaid pharmacy reimbursements and average prices paid by pharmacy retail customers for four distinct pharmaceutical products across the US in 1994. We develop a more general theory than past researchers to enable provider objectives to vary with Medicaid pharmacy reimbursement levels. We find that provider objectives and the direction of relationship between Medicaid pharmacy reimbursements and retail prices vary with Medicaid pharmacy reimbursement levels. At high Medicaid pharmacy reimbursement levels we find a consistent negative relationship across products. At low Medicaid pharmacy reimbursement levels, the direction of the relationship is product-specific. As a result, policy-makers should be aware that policies affecting reimbursements from government-sponsored health insurance will also affect retail customers that include the uninsured. Paradoxically, for certain products if a state cuts a generous Medicaid reimbursement level this could hurt uninsured patients, whereas cuts in a stingy Medicaid reimbursement rate may help uninsured patients.

Cost Allocation↗
PubMed1999

Addressing the inequity of capitation by variable soft contracts.

In the search for greater efficiency and cost-containment, many health systems have introduced the practice of medical care providers operating under a fixed budget, often referred to as the capitation or fundholding contract. Although the capitation contract seems equitable at first glance, the sequential decision-making practice of providers-shaped by their rate of present-preference and their attitude toward the risk of running out of budget-may result in serious violations of basic equity principles. We propose a variable soft (or mixed) payment contract (VSC), where the share of the retrospective payment increases over time, as a way to make the contracts more equitable. We also discuss how the parameters of the capitation contract (length of the budget period, soft or hard contracts, solo vs. consortium practice etc.), which are usually set by efficiency criteria, may have serious implications with regard to the equity of the system.

Budgets↗
PubMed1999

Inferring capitation rates from aggregate health plans' costs.

Setting risk-adjusted capitation rates in health systems with centralized financing and decentralized delivery is one of the most intriguing policy issues. The common practice to set capitation group rates is based on individual data collected from either population surveys or medical records, using a single-and in most cases arbitrary-set of relative unit costs of services. This paper presents a method for estimating group-specific mean costs and capitation rates using a panel of aggregate cost data of the competing health plans and the composition of their populations. This method is used to estimate mean costs and capitation rates for the Israeli health care system. The limited data available severely constrains the range of estimable models, however, the results evoke some questions with regards to reimbursement and rates presently used, as well as to the methodology used to estimate them.

Adolescent↗
PubMedDate not supplied

Relative fees and the utilization of physicians' services in Canada.

STUDY QUESTION: The study objective is to estimate the relationship between changes in the relative fee physicians receive for a procedure and the utilization of the procedure. DATA SOURCES/STUDY SETTING: The study uses claims-based, procedure-specific, quarterly, aggregate utilization data for physicians in three specialties and four provinces in Canada for the period 1977-1989. STUDY DESIGN: The unit of analysis is an individual procedure. Multi-variate regression methods for cross-sectional/times-series data are applied to estimate the utilization-fee relationship while controlling for supply- and demand-side determinants of utilization. PRINCIPAL FINDINGS: There is no evidence of a strong, uniform utilization response among the 11 procedures analyzed. The results include a mixture of significant and non-significant fee coefficients, and among the significant coefficients, a mixture of signs is observed. The results are consistent with utility-maximizing behaviour by physicians rather than with profit-maximizing behaviour. CONCLUSIONS: The fact that the direction and degree of the utilization effect associated with changing fees is procedure-specific has direct implications for our ability to develop effective policies to modify physician behaviour that are based primarily on financial incentives, particularly those based on manipulating fees. The study also highlights the limitations of analyses based on aggregate data and suggests methodological approaches that have potential to overcome some of these limitations to fill gaps in our current knowledge.

Canada↗
PubMedDate not supplied

Reimbursement policy of hospitals in the Federal Republic of Germany.

The factors that have contributed to an overhaul of German hospital policy in the last 12 months are both numerous and highly interrelated. Rising health expenditures and inflexible mechanisms for implementing hospital policy are major culprits, as are the considerably changed political and economic circumstances over the last 15 years. Although this overhaul does embody some changes in the direction of German health care policy, they can best be understood as a further manifestation of the continuity that has characterized policy in this area for the past 100 years; a continuity rooted in the widely shared belief that disease, whatever its nature, is beyond the control of individuals. The key to cost containment is considered to lie in the reduction of the average length of stay and in the better utilization of hospital facilities. Payment remains directly related neither to specific diagnoses of individual patients nor to occupancy rates in individual departments, which vary greatly across disciplines and specialities. In the era that is unfolding, one political phenomenon requires close watching in the future: policy coalitions at the Land-level will become even more important as prime movers than they have been in the past. Demands for Strukturreform are a regular feature of many governmental systems. Yet the capacity of political bodies--whether ministries or parliaments--is severely limited by the distribution of power and control over resources and by the political dynamics which they generate. In the FRG, major reforms will not take place until after the 1987 federal elections, and it is essential to remember that the realms of campaign rhetoric and of policy choice and implementation are governed by entirely different sets of rules and constraints.

Financial Management↗