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How do hospitals cope with sustained slow growth in Medicare prices?

ABSTRACT: OBJECTIVE: To estimate the effects of changes in Medicare inpatient hospital prices on hospitals' overall revenues, operating expenses, profits, assets, and staffing. PRIMARY DATA SOURCE: Medicare hospital cost reports (1996-2009). STUDY DESIGN: For each hospital, we quantify the year-to-year price impacts from changes in the Medicare payment formula. We use cumulative simulated price impacts as instruments for Medicare inpatient revenues. We use a series of two-stage least squares panel data regressions to estimate the effects of changes in Medicare revenues among all hospitals, and separately among not-for-profit versus for-profit hospitals, and among hospitals experiencing real price increases ("gainers") versus decreases ("losers"). PRINCIPAL FINDINGS: Medicare price cuts are associated with reductions in overall revenues even larger than the direct Medicare price effect, consistent with price spillovers. Among not-for-profit hospitals, revenue reductions are fully offset by reductions in operating expenses, and profits are unchanged. Among for-profit hospitals, revenue reductions decrease profits one-for-one. Responses of gainers and losers are roughly symmetrical. CONCLUSIONS: On average, hospitals do not appear to make up for Medicare cuts by "cost shifting," but by adjusting their operating expenses over the long run. The Medicare price cuts in the Affordable Care Act will "bend the curve," that is, significantly slow the growth in hospitals' total revenues and operating expenses.

SUBMITTER: White C

PROVIDER: S-EPMC3922464 | biostudies-literature | 2014 Feb

REPOSITORIES: biostudies-literature

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How do hospitals cope with sustained slow growth in Medicare prices?

White Chapin C Wu Vivian Yaling VY

Health services research 20131001 1

<h4>Objective</h4>To estimate the effects of changes in Medicare inpatient hospital prices on hospitals' overall revenues, operating expenses, profits, assets, and staffing.<h4>Primary data source</h4>Medicare hospital cost reports (1996-2009).<h4>Study design</h4>For each hospital, we quantify the year-to-year price impacts from changes in the Medicare payment formula. We use cumulative simulated price impacts as instruments for Medicare inpatient revenues. We use a series of two-stage least sq ...[more]

PMID: 24094438

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Project description:ImportanceVarious studies have documented the rise in commercial insurance prices during the past 2 decades; however, estimates on the association of rising costs with health systems' financial health are lacking. This study calculated 2 measures from standardized Audited Financial Statements (AFSs)-operating margins and days of unrestricted cash on hand-to explore the associations.ObjectiveTo estimate the association between health systems' financial condition and the ratio of commercial to Medicare relative prices.Design, setting, and participantsThis cross-sectional analysis combined standardized 2018 AFSs from a large sample of US health systems with publicly available relative price data to assess the association between their financial outcomes and commercial-to-Medicare relative inpatient prices. The 2018 AFSs were collected and standardized from a convenience sample of multihospital health systems and single hospitals that were included in round 4 of the RAND Hospital Price Transparency Study. Cross-sectional, multivariate regression models were estimated, controlling for payer mix and other system characteristics, and models were weighted by health systems' 2018 adjusted admissions. The analyses were conducted July 2021 through November 2022.ExposuresThe commercial-to-Medicare relative price for inpatient services (2018-2020 pooled average), which represents the average amount paid by commercial plans as a percentage of what Medicare would have paid to the same health system for the same services.Main outcomes and measuresOperating margins and days cash on hand, which capture complementary aspects of financial performance (profitability and liquidity).ResultsThe study sample included 156 health systems in the US, representing diverse geography, size, and ownership type. Mean (SD) days cash on hand were 180.1 (113.3) and operating margins were 3.3% (3.6%) in 2018. Overall, a 1-unit increase in the commercial-to-Medicare relative price ratio was associated with a 21.3% (95% CI, 21.3% to 21.4%; P < .001) increase in days cash on hand and a 2.7 (95% CI, 2.7 to 2.7; P < .001) percentage point increase in average operating margins. Higher Medicaid payer mix share was associated with fewer days cash on hand (-3.3%; 95% CI, -3.3% to -3.3%; P < .001) and lower operating margins (-0.081; 95% CI, -0.082 to -0.081; P < .001).Conclusions and relevanceThis cross-sectional study of health system financial data found that higher commercial-to-Medicare relative prices and a lower Medicaid payer share were associated with higher profits and more days cash on hand. These findings provide evidence against the claim that relatively higher commercial prices are primarily used to offset losses from public payers rather than to increase profits and liquidity.

Project description:Importance:In the Medicare Advantage (MA) program, Medicare enrollees may be steered by their health plan to specific hospitals. Little is known about the quality of hospitals that serve MA enrollees. Objective:To compare the quality of hospitals that admit MA enrollees with the quality of those that admit traditional Medicare enrollees. Design, Setting, and Participants:This cross-sectional study used data from the 2012 to 2016 Medicare Provider Analysis and Review to compare quality of care, as measured by the star rating given by the Centers for Medicare and Medicaid Services and readmission rates, in hospitals that serve MA enrollees and traditional Medicare enrollees using multinomial logit models. Participants were 7?130?610 Medicare beneficiaries admitted to 2994 acute care hospitals across the United States in 2016. Data were analyzed between August 2018 and August 2019. Exposures:The exposure was MA enrollment. Adjusters included demographic and clinical characteristics and zip code fixed effects. Main Outcomes and Measures:Hospital Compare star ratings and quintiles of performance in 30-day readmission rates. Results:The sample included 7?130?610 Medicare beneficiaries in 2016 (54.3% female; mean [SD] age, 72.7 [13.2] years). Of 12?190?270 total hospitalizations, 1?211?293 traditional Medicare and 494?352 MA patients were admitted to 718 low-readmission hospitals and 1?205?586 traditional Medicare and 526?955 MA patients were admitted to 597 high-readmission hospitals. Accounting for observed patient characteristics, MA enrollees less often entered either low- or high-quality hospitals and were more often admitted to average-quality hospitals. For nonemergent hospitalizations, MA enrollees were 1.9 percentage points (95% CI, 1.5-2.2 percentage points) less likely to enter a low-readmissions hospital, 5.1 percentage points (95% CI, 4.6-5.6 percentage points) more likely to enter an average-readmissions hospital, and 3.2 percentage points (95% CI, 2.9-3.5 percentage points) less likely to enter a high-readmissions hospital compared with traditional Medicare enrollees. Patients with MA were also 2.6 percentage points (95% CI, 2.2-2.9 percentage points) less likely to enter a 1- to 2-star hospital, 5.5 percentage points (95% CI, 4.9-5.9 percentage points) more likely to enter a 3-star hospital, and 2.8 percentage points (95% CI, 2.5-3.2 percentage points) less likely to enter a 4- to 5-star hospital compared with traditional Medicare enrollees. The differences were less pronounced for emergency admissions. Conclusions and Relevance:This study found that enrollees in MA plans were more likely to be admitted to average-quality hospitals instead of either high- or low-quality hospitals, suggesting that MA plans may be steering their enrollees to specific hospitals.

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How do hospitals cope with sustained slow growth in Medicare prices?

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How do hospitals cope with sustained slow growth in Medicare prices?

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