The cost of crisis care
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POLIOY WATCH comings in the global budgeting ap- proach and how incentives and flex- ibility are crucial if hospitals are going to be able to adapt and re- spond to local goals, population changes, and the ever-changing landscape of new programs and technology. A couple of Lave et ars conclusions are worth emphas/zing: (1) The main advantage of the global budgeting is its simplicity and its ability to help control costs. (2) This specific system is the prod- uct of a political environment that is quite different from the U.S. (3) To implement systems like the On- tario approach requires extensive conseusus-bullding among all in- volved-no mean feat. Finally, it should be pointed out that to micromanage the budget of globally funded institutions runs the risk of destroying its main ad- vantages-simplicity and low man- agement costs--although the ad- vantages of micromanagement and microincentives have yet to be con- firmed. For example, the average costs per patient in Canadian hospi- tals are already less than in the U.S., so it cannot be assumed what the "true" impact of U.S.-style cost-containment measures will be, at least not in Canada. To conclude, on a cautionary note, when revising any health system, one must ask four other key questions: what benefits, who benefits, who decides, and who pays. Global budgeting only deals with how much.--WDD "the Ceet d ~ele Cam [Stern RS, Weissman JS, Epstein AM. The emergency department as a pathway to admission for poor and high-cost patients. JAMA 1991; 266: 2238-43.] t is virtually impossible to overes- I timate the importance of the hos- pital emergency room as the en- try point to the health care system for the poor and uninsured in this country. Historically, many inner- city hospitals have faced substan- tial financial losses as a result. Pre- vious studies have cited how emergency department admissions tend to have higher costs than ad- missions through other routes, even when controlling for diagnosis-re- lated group (DRG). However, vir- tually no investigations have shed light on what causes this phenome- non and, in particular, on patient characteristics that could contrib- ute to it. Three dimensions represent the central features of this study's anal- ysis: (1) the social characteristics of the patient, including income and demographics; (2) clinical charac- teristics including primary and sec- ondary diagnosis, DRG, and sever- ity of illness; and (3) resource characteristics such as payer, length of stay, and total charges. Analysis of the components of these dimensions was conducted to deter- mine whether patients admitted through the emergency room differ from patients admitted through other routes and whether there is an association between admission routes and use of resources. The re- search was based on 20,089 patients admitted during a 6-month period to 5 hospitals in Massachusetts in 1987. In addition to key informa- tion provided by participating hos- pitals, the research team obtained demographic characteristics, socio- economic status, and availability of a regular source of care through pa- tient interviews. Just over 50% (50.7%) of the 20,089 admissions occurred through the emergency depart- ment. These admissions differed significantly from ambulatory care patients admitted to the five hospi- tals in that they tended to be non- white, of lower socioeconomic sta- tus, older, and unmarried. While Medicaid patients were clearly more likely to enter the hospital through the emergency department H THE AMERICAN JOURNAL OFSURGERY VOLUME 165 MARCH 1993 than privately insured individuals, the uninsured demonstrated the greatest difference (i.e., a 3.1 times greater likelihood for admission through the emergency depart- ment). Resources used in emergen- cy room admissions were clearly higher than in ambulatory admis- sions even after controlling for se- verity of illness: length of stay was 27% higher and charges were 13% greater. The authors conclude that the profile of patients admitted through the emergency departments of the study hospitals mirrors the classic indicators for a population facing health care access problems. The significant difference in costs relat- ed to this access problem occurs even when age, socioeconomic fac- tors, severity of illness, and age are controlled. The authors suggest that the unplanned nature of these admissions, uncertain diagnosis, placement issues (especially for medical patients), and lack of treat- ment management plans may all contribute to greater resource use. Consequences for care include the potential for reduced access to emergency department services if hospitals believe they are financial liabilities. They also suggest the po- tential need for considering adjust- merits to hospital reimbursement formulas if they admit large num- bers of patients through their emer- gency departments. This important report adds fur- ther credence to the argument that emergency department use is a key indicator of health care access problems. Moreover, it suggests why hospitals facing this situation may experience difficulty in justify- ing higher reimbursement rates. That is, other factors more subtle than severity of illness, such as placement and inability to plan for a patient admission or develop a treatment plan, may contribute to that higher cost. Not mentioned, but of potential importance as well,
Transcript of The cost of crisis care
POLIOY WATCH
comings in the global budgeting ap- proach and how incentives and flex- ibility are crucial if hospitals are going to be able to adapt and re- spond to local goals, population changes, and the ever-changing landscape of new programs and technology. A couple of Lave et ars conclusions are worth emphas/zing: (1) The main advantage of the global budgeting is its simplicity and its ability to help control costs. (2) This specific system is the prod- uct of a political environment that is quite different from the U.S. (3) To implement systems like the On- tario approach requires extensive conseusus-bullding among all in- volved-no mean feat.
Finally, it should be pointed out that to micromanage the budget of globally funded institutions runs the risk of destroying its main ad- vantages-simplicity and low man- agement costs--although the ad- vantages of micromanagement and microincentives have yet to be con- firmed. For example, the average costs per patient in Canadian hospi- tals are already less than in the U.S., so it cannot be assumed what the " true" impact of U.S.-style cost-containment measures will be, at least not in Canada. To conclude, on a cautionary note, when revising any health system, one must ask four other key questions: what benefits, who benefits, who decides, and who pays. Global budgeting only deals with how much.--WDD
"the Ceet d ~e l e Cam
[Stern RS, Weissman JS, Epstein AM. The emergency department as a pathway to admission for poor and high-cost patients. JAMA 1991; 266: 2238-43.]
t is virtually impossible to overes- I timate the importance of the hos-
pital emergency room as the en- try point to the health care system for the poor and uninsured in this
country. Historically, many inner- city hospitals have faced substan- tial financial losses as a result. Pre- vious s tud ies have c i ted how emergency department admissions tend to have higher costs than ad- missions through other routes, even when controlling for diagnosis-re- lated group (DRG). However, vir- tually no investigations have shed light on what causes this phenome- non and, in particular, on patient characteristics that could contrib- ute to it.
Three dimensions represent the central features of this study's anal- ysis: (1) the social characteristics of the patient, including income and demographics; (2) clinical charac- teristics including primary and sec- ondary diagnosis, DRG, and sever- ity of illness; and (3) resource character is t ics such as payer, length of stay, and total charges. Analysis of the components of these dimensions was conducted to deter- mine whether patients admitted through the emergency room differ from patients admitted through other routes and whether there is an association between admission routes and use of resources. The re- search was based on 20,089 patients admitted during a 6-month period to 5 hospitals in Massachusetts in 1987. In addition to key informa- tion provided by participating hos- pitals, the research team obtained demographic characteristics, socio- economic status, and availability of a regular source of care through pa- tient interviews.
Just over 50% (50.7%) of the 20,089 admiss ions occur red through the emergency depart- ment. These admissions differed significantly from ambulatory care patients admitted to the five hospi- tals in that they tended to be non- white, of lower socioeconomic sta- tus, older, and unmarried. While Medicaid patients were clearly more likely to enter the hospital through the emergency department
H THE AMERICAN JOURNAL OFSURGERY VOLUME 165 MARCH 1993
than privately insured individuals, the uninsured demonstrated the greatest difference (i.e., a 3.1 times greater likelihood for admission through the emergency depart- ment). Resources used in emergen- cy room admissions were clearly higher than in ambulatory admis- sions even after controlling for se- verity of illness: length of stay was 27% higher and charges were 13% greater.
The authors conclude that the profile of patients admitted through the emergency departments of the study hospitals mirrors the classic indicators for a population facing health care access problems. The significant difference in costs relat- ed to this access problem occurs even when age, socioeconomic fac- tors, severity of illness, and age are controlled. The authors suggest that the unplanned nature of these admissions, uncertain diagnosis, placement issues (especially for medical patients), and lack of treat- ment management plans may all contribute to greater resource use. Consequences for care include the potential for reduced access to emergency department services if hospitals believe they are financial liabilities. They also suggest the po- tential need for considering adjust- merits to hospital reimbursement formulas if they admit large num- bers of patients through their emer- gency departments.
This important report adds fur- ther credence to the argument that emergency department use is a key indicator of health care access problems. Moreover, it suggests why hospitals facing this situation may experience difficulty in justify- ing higher reimbursement rates. That is, other factors more subtle than severity of illness, such as placement and inability to plan for a patient admission or develop a treatment plan, may contribute to that higher cost. Not mentioned, but of potential importance as well,
POLIOY WATOH
are the social, mental health, and nutrition needs that may accompa- ny those who have in many circum- stances been denied care. Solutions must consider these broader, deeper issues raised by the findings of this research.--DPA
0.8. ~ ~
[US. General Accounting Office. Employer-based insurance: high costs, wide variation threaten system. September 1992, GAO/HRD-92-125. Available by calling 202-275-6241 or by writing US. General Accounting Office, P.O. Box 6015, Gaithersburg, Maryland 20877. 60 pp.]
he U.S. General Accounting T Office (GAO), the auditing
arm of the federal govern- ment, has issued this report on the problems associated with employer- sponsored health insurance. The pages are chock full of timely statis- tics that will propel the demand for health care reform. Starting off with a bang, the report points out that health expenditures in the U.S. are the highest in the world, both per capita and as a share of the gross domestic product, and that medical care inflation has averaged 7.5% per year. This is nearly twice the general inflation rate for that time period. This well-researched report should scare anyone who thinks reform is unnecessary. Also, it should scare any provider who thinks that reform will leave them untouched.
The points of emphasis are as fol- lows: (1) Employers who provide health insurance for their employ- ees find that the cost of premiums is rising far faster than their other business-related costs and is cutting into their competitiveness in the global marketplace. (2) Health in- surance is only affordable for those in good health. (3) Those who have health problems are denied insur-
ance or charged exorbitant premi- ums for limited benefits.
The problem is that the health industry as we now know it fails to conform to free market principles. Competition between providers fails to keep costs down and insured consumers have no incentive to shop for the best price. The rate of inflation in the industry is higher than that of the rest of the economy, whereas its productivity rate is low- er. For example, wages have in- creased more rapidly in the health sector than elsewhere. Physicians' net incomes grew 7% annually be- tween 1981 and 1989, far faster than the growth in wages for profes- sions in other industries.
Cost shifting has reached its ceil- ing of acceptability. Employers fi- nance about 30% of all personal health care expenditures, individ- uals pay 36%, and government pro- grams pay 34%. These proportion- ate shares have remained relatively stable during the past decade; how- ever, the costs of personal health care services have escalated far faster than the costs for other goods and services. From a humane stand- point, there is too much luck associ- ated with whether or not someone has access to health care. If people work for a large employer, then they probably have comprehensive health insurance. If they work for a small employer or if they are em- ployed part-time, then they proba- bly do not. If employers are located in Los Angeles or Miami, they pay almost 50% more for health bene- fits than if they are in Philadelphia or Detroit. If they are in Seattle or E1 Paso, costs are only half as much as in Miami or Los Angeles.
The report concludes that until access to health care is assured for everyone, the cost shifting that is now occurring will continue, and it is the cost shifting that is causing premiums to escalate for those who can pay. The data show that about half of all hospitals completely sub-
sidize their losses from Medicaid, Medicare, and other government programs by setting prices that gen- erate higher profits on private pa- tients. Unlike a true market system, they do not cover their losses by se- curing a larger share of private patients.
In a footnote, the report suggests that government programs may be reimbursing hospitals an appropri- ate amount and that it is large em- ployers and private insurers that are being overbilled. One suspects that this footnote will earn more at- tention than the size of its print con- notes. The GAO pulls no punches when it explains that there are no brakes left on this train. Employers are calling it quits, individuals are calling it quits, and government is calling it qults.--MEG
When to Vceat...? l lwl le ~ e Oueettm
[Vella S, Giuliano M, Pezzotti P, et al. Survival of zidovudine-treated patients with AIDS compared with that of contemporary untreated patients. JAMA 1992; 267: 1232-6.]
[Hamilton JD, Hartigan PM, Simberkoff MS, et al. Controlled trial of early versus late treatment with zidovudine in symptomatic immunodeficiency virus infection. N Engl J Med 1992; 326: 437-43.]
reproved survival of patients with symptomatic HIV infection and full-blown AIDS who re-
ceived treatment with zidovudine (AZT) has been demonstrated through controlled clinical trials. However, zidovudine has not been adequately studied with respect to its impact on long-term survival and its overall cost-effectiveness. Whether to administer zidovudine early during the course of HIV in- fection or late during the sympto- matic stages remains unknown.
Although their study was not a randomized, controlled clinical tri-
THE AMERICAN JOURNAL OF SURGERY VOLUME 165 MARCH 1993 II I
