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Health Care Costs and Financing

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Medicaid reimbursement affects nursing home staffing levels and quality of care

State Medicaid programs that reimburse nursing homes at lower levels or use flat-rate methods may diminish quality of care by reducing the professional mix of the nursing staff. However, more generous or cost-based Medicaid reimbursement policies may not have a large enough impact on staffing or other aspects of nursing home operations to improve patient outcomes, conclude Joel W. Cohen, Ph.D., and William D. Spector, Ph.D., of the Agency for Health Care Policy and Research.

They used a nationally representative sample of nursing homes and their residents to examine the impact of Medicaid payment policies (flat-rate reimbursement vs. cost-based reimbursement) and level of reimbursement as well as nursing home market conditions on facility staffing intensity and skill levels, and the impact of staffing intensity on residents' mortality, bedsores, and functioning. The researchers found that after adjusting for patient case mix, flat-rate reimbursement was associated with 1.6 fewer RNs per 100 residents (a 29 percent reduction relative to the mean for Medicaid-certified nursing homes in 1987) and 4.2 more LPNs per 100 residents (a 45 percent increase relative to the mean). An increase of .5 full-time RN per 100 residents (about a 10 percent increase, on average) would reduce the mean marginal probability of dying by about 1 percent. Although a small effect, it translates into an estimated 3,000 fewer deaths annually for residents of Medicaid-certified nursing homes, according to the researchers.

Higher intensity of LPN staffing significantly improves residents' functional outcomes, although the impact is relatively small. An increase of one full-time LPN per 100 residents (about a 10 percent increase, on average) would improve the ADL (activities of daily living) score by about 0.6 percent (fewer impaired functions). Overall, the effects of reimbursement on staffing intensity and staffing on outcomes were not large enough to show a significant effect of reimbursement on outcomes.

For more information see "The effect of Medicaid reimbursement on quality of care in nursing homes" by Drs. Cohen and Spector in the Journal of Health Economics 15, pp. 223-48, 1996. Reprints (AHCPR Publication No. 96-R116) are available from AHCPR.

Health insurance plans vary in coverage review process for new medical technology

Insurance coverage of new technologies is determined by health plans that now more closely evaluate their coverage policy than in the past. However, these plans vary substantially in their decisionmaking process for new medical technology, and their medical directors often do not make the final coverage decisions.

These findings stem from a survey of medical directors at 231 U.S. private indemnity and HMO plans conducted by Claudia A. Steiner, M.D., M.P.H., a researcher with the Agency for Health Care Policy and Research's Center for Organization and Delivery Studies, and her colleagues at the Johns Hopkins University. The coverage decisions made by private health care plans, and the process by which the plans make their decisions, have important implications for diffusion of new medical technology and access of insured populations to new technology.

Private health plans vary in their review process, timing of coverage decisions, and the information sources used for these decisions. For example, the most important factors prompting a medical director to review whether or not laser angioplasty should be covered (rather than automatically covering the routine procedure, "angioplasty"), were the following: the technology was considered experimental (82 percent of medical directors), it had an increased complication rate (78 percent), or it was not standard practice in the community (68 percent). Nonclinical factors also cited were high potential cost (36 percent), a possible liability risk (15 percent), and many members of the insured population being affected (13 percent). Although medical directors in 96 percent of plans take part in the medical policy review process for new technology, a minority of them retain final authority in coverage decisions.

The survey revealed that private plan medical directors frequently are unaware when a new technology, such as a laser therapy, is used in a procedure that is billed under a general billing code. About 64 percent of plan medical directors probably would not be aware that laser technology was used for photodynamic therapy for bladder cancer, 71 percent would not be aware of its use for laser discectomy for treatment of rupture of an intervertebral disk, and 78 percent would not be aware of its use in laser angioplasty to treat coronary artery disease.

New technologies often are billed under a general billing code before the more specific common procedure terminology (CPT) code becomes available. Paying for coverage of these technologies, without knowing it, raises the possibility that less effective or less safe technologies could be introduced rapidly into the treatment of insured populations, according to the researchers.

Details are in "Awareness of providers' use of new medical technology among private health care plans in the United States," by Neil R. Powe, M.D., M.P.H., M.B.A., Dr. Steiner, Gerard F. Anderson, Ph.D., and Abhik Das, M.S., in the International Journal of Technology Assessment in Health Care 12(2), pp. 360-369, 1996; and "The review process used by U.S. health care plans to evaluate new medical technology for coverage," by Dr. Steiner, Dr. Powe, Dr. Anderson, and Mr. Das, in the May 1996 Journal of General Internal Medicine 11, pp. 294-302.

High costs for the most sophisticated trauma centers support limiting the number of such centers

Severely injured trauma patients have greater chances of survival when treated in specialized trauma centers. By 1993, 21 States had legally authorized State-wide or regionally based formal trauma systems, and most of these States had designated certain hospitals as comprehensive or Level I trauma centers. However, the high costs associated with Level I trauma centers suggest that States should limit the number of these centers or reconsider the requirements placed on them, according to a recent study.

Rosanna M. Coffey, Ph.D., of the Agency for Health Care Policy and Research, Marsha G. Goldfarb, Ph.D., formerly an AHCPR staff member, and Gloria J. Bazzoli, Ph.D., of the Hospital Research and Educational Trust, analyzed discharge abstracts for a national sample of severely injured trauma patients in 44 trauma centers and 60 matched control hospitals in 1987. They found that Level I trauma centers, which have specialized equipment, laboratories, and trauma teams, were the most expensive facilities for trauma care and were more than twice as costly as Level II trauma centers, which provide trauma care, but not teaching and leadership functions.

The authors also discuss the implications of these findings for subsidizing the high costs of trauma centers and for diagnosis-related group (DRG) refinements for trauma care.

For more information, see "Trauma systems and the costs of trauma care," by Drs. Goldfarb, Bazzoli, and Coffey, in the April 1996 issue of HSR: Health Services Research 31(1), pp. 71-95.

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