Financial impact of the Medicare prospective payment system on long term acute care hospitals

Objective. Long Term Acute Care Hospitals (LTACs) are subject to Medicare rules because they accept Medicare and Medicaid patients. In October 2002, Medicare changed the LTAC reimbursement formulas, from a cost basis system to a Prospective Payment System (PPS). This study examines whether the PPS has negatively affected the financial performance of the LTAC hospitals in the period following the reimbursement change (2003-2006), as compared to the period prior to the change (1999-2003), and if so, to what extent. This study will also examine whether the PPS has resulted in a decreased average patient length of stay (LOS) in the LTAC hospitals for the period of 2003-2006 as compared to the prior period of 1999-2003, and if so, to what extent. ^ Methods. The study group consists of two large LTAC hospital systems, Kindred Healthcare Inc. and Select Specialty Hospitals of Select Medical Corporation. Financial data and operational indicators were reviewed, tabulated and dichotomized into two groups, covering the two periods: 1999-2002 and 2003-2006. The financial data included net annual revenues, net income, revenue per patient per day and profit margins. It was hypothesized that the profit margins for the LTAC hospitals were reduced because of the new PPS. Operational indicators, such as annual admissions, annual patient days, and average LOS were analyzed. It was hypothesized that LOS for the LTAC hospitals would have decreased. Case mix index, defined as the weighted average of patients’ DRGs for each hospital system, was not available to cast more light on the direction of LOS. ^ Results. This assessment found that the negative financial impacts did not materialize; instead, financial performance improved during the PPS period (2003-2006). The income margin percentage under the PPS increased for Kindred by 24%, and for Select by 77%. Thus, the study’s working hypothesis of reduced income margins for the LTACs under the PPS was contradicted. As to the average patient length of stay, LOS decreased from 34.7 days to 29.4 days for Kindred, and from 30.5 days to 25.3 days for Select. Thus, on the issue of LTAC shorter length of stay, the study’s working hypothesis was confirmed. ^ Conclusion. Overall, there was no negative financial effect on the LTAC hospitals during the period of 2003-2006 following Medicare implementation of the PPS in October 2002. On the contrary, the income margins improved significantly. ^ During the same period, LOS decreased following the implementation of the PPS. This was consistent with the LTAC hospitals’ pursuit of financial incentives.^

Financial impact of the Medicare prospective payment system on long term acute care hospitals

Objective. Long Term Acute Care Hospitals (LTACs) are subject to Medicare rules because they accept Medicare and Medicaid patients. In October 2002, Medicare changed the LTAC reimbursement formulas, from a cost basis system to a Prospective Payment System (PPS). This study examines whether the PPS has negatively affected the financial performance of the LTAC hospitals in the period following the reimbursement change (2003–2006), as compared to the period prior to the change (1999–2003), and if so, to what extent. This study will also examine whether the PPS has resulted in a decreased average patient length of stay (LOS) in the LTAC hospitals for the period of 2003–2006 as compared to the prior period of 1999-2003, and if so, to what extent. ^ Methods. The study group consists of two large LTAC hospital systems, Kindred Healthcare Inc. and Select Specialty Hospitals of Select Medical Corporation. Financial data and operational indicators were reviewed, tabulated and dichotomized into two groups, covering the two periods: 1999–2002 and 2003–2006. The financial data included net annual revenues, net income, revenue per patient per day and profit margins. It was hypothesized that the profit margins for the LTAC hospitals were reduced because of the new PPS. Operational indicators, such as annual admissions, annual patient days, and average LOS were analyzed. It was hypothesized that LOS for the LTAC hospitals would have decreased. Case mix index, defined as the weighted average of patients’ DRGs for each hospital system, was not available to cast more light on the direction of LOS. ^ Results. This assessment found that the negative financial impacts did not materialize; instead, financial performance improved during the PPS period (2003–2006). The income margin percentage under the PPS increased for Kindred by 24%, and for Select by 77%. Thus, the study’s working hypothesis of reduced income margins for the LTACs under the PPS was contradicted. As to the average patient length of stay, LOS decreased from 34.7 days to 29.4 days for Kindred, and from 30.5 days to 25.3 days for Select. Thus, on the issue of LTAC shorter length of stay, the study’s working hypothesis was confirmed. ^ Conclusion. Overall, there was no negative financial effect on the LTAC hospitals during the period of 2003–2006 following Medicare implementation of the PPS in October 2002. On the contrary, the income margins improved significantly. ^ During the same period, LOS decreased following the implementation of the PPS. This was consistent with the LTAC hospitals’ pursuit of financial incentives. ^

State rate -setting in conjunction with Medicare prospective payment: The effects of the Maine program

Maine implemented a hospital rate-setting program in 1984 at approximately the same time as Medicare started the Prospective Payment System (PPS). This study examines the effectiveness of the program in controlling cost over the period 1984-1989. Hospital costs in Maine are compared to costs in 36 non rate-setting states and 11 other rate-setting states. Changes in cost per equivalent admission, adjusted patient day, per capita, admissions, and length of stay are described and analyzed using multivariate techniques. A number of supply and demand variables which were expected to influence costs independently of rate-setting were controlled for in the study. Results indicate the program was effective in containing costs measured in terms of cost per adjusted patient day. However, this was not true for the other two cost variables. The average length of stay increased during the period in Maine hospitals indicating an association with rate-setting. Several supply variables, especially the number of beds per 1,000 population were strongly associated with the cost and use of hospitals. ^

Utilization behavior of the elderly in an HMO: A causal analysis

Planning and providing health care services for the elderly represents a major challenge to the health care system. One part of that challenge is the identification of those factors which determine the utilization of services by this population. The purpose of this study is to explain the use of health care services by elderly subscribers in a prepaid group health plan, using the theoretical framework developed by Andersen and Aday. The impact of the predisposing, enabling and need factors on utilization was modelled through a structural equation approach using LISREL. The data were derived from Kaiser-Permanente's Medicare Prospective Payment Project, August 1980-December 1982. Need factors, in general, were the most significant determinants of utilization, with the predisposing and enabling factors found to be secondary but necessary links in the causal chain. The model was fitted to the data from the youngest age group (65-74 years) and then evaluated for goodness of fit in the two older groups (75-84 and 85+ years). Implications of the study's findings and suggestions for further modelling the utilization behavior of the elderly are discussed. ^

An evaluation of the centers for Medicare & Medicaid Services' Hospital Acquired Conditions and Present on Admission Indicator Reporting program

Objective: This dissertation evaluated three aspects of the Centers for Medicare and Medicaid Services' Hospital Acquired Conditions and Present on Admission Indicator Reporting program (HACPOA program) to produce three journal articles for publication. ^ Methods: All payer admission records from state inpatient databases from Arizona, New Jersey and Washington states were analyzed for the year 2008. However some analyses required a sample of adult only Medicare patients in the first two studies. California's inpatient data (2004 – 2010) was also analyzed in the third study to examine the reporting and non-payment program elements' impact on the incidence of hospital acquired conditions. ^ Results: Majority diagnoses reported in inpatient prospective payment systems hospitals were present on admission. However, some diagnoses are still coded as "not present on admission" and "insufficient documentation to determine whether or not conditions are present on admission or not". This is important because it reveals that hospital complications still occur in hospitals. Hospital fall and trauma injuries were the most common hospital acquired conditions observed in this study. Predictors of hospital fall injuries include age, gender, number of diagnoses, number of procedures, number of chronic conditions while predictors of hospital trauma injuries include number of e-codes, number of diagnoses and the presence of chronic conditions on a patient's admission records. Finally, the implementation of the present on admission reporting requirement increased reports of certain hospital acquired conditions while the non-payment policy element in the Hospital Acquired Conditions program reduced the incidence of hospital fall and trauma injuries in particular. ^ Conclusion: The implementation of the Hospital Acquired Conditions and Present on Admission Indicator Reporting program has made the state inpatient database a more useful source of data capable of now identifying hospital complications. The reporting and nonpayment program elements in the HACPOA program have also impacted the incidence of hospital acquired conditions. ^

Federally regulated institutional review boards: The aspects of a "model" IRB---Is the current system in need of a tune up or complete overhaul?

Institutional Review Boards (IRBs) are the primary gatekeepers for the protection of ethical standards of federally regulated research on human subjects in this country. This paper focuses on what general, broad measures that may be instituted or enhanced to exemplify a "model IRB". This is done by examining the current regulatory standards of federally regulated IRBs, not private or commercial boards, and how many of those standards have been found either inadequate or not generally understood or followed. The analysis includes suggestions on how to bring about changes in order to make the IRB process more efficient, less subject to litigation, and create standardized educational protocols for members. The paper also considers how to include better oversight for multi-center research, increased centralization of IRBs, utilization of Data Safety Monitoring Boards when necessary, payment for research protocol review, voluntary accreditation, and the institution of evaluation/quality assurance programs. ^ This is a policy study utilizing secondary analysis of publicly available data. Therefore, the research for this paper focuses on scholarly medical/legal journals, web information from the Department of Health and Human Services, Federal Drug Administration, and the Office of the Inspector General, Accreditation Programs, law review articles, and current regulations applicable to the relevant portions of the paper. ^ Two issues are found to be consistently cited by the literature as major concerns. One is a need for basic, standardized educational requirements across all IRBs and its members, and secondly, much stricter and more informed management of continuing research. There is no federally regulated formal education system currently in place for IRB members, except for certain NIH-based trials. Also, IRBs are not keeping up with research once a study has begun, and although regulated to do so, it does not appear to be a great priority. This is the area most in danger of increased litigation. Other issues such as voluntary accreditation and outcomes evaluation are slowing gaining steam as the processes are becoming more available and more sought after, such as JCAHO accrediting of hospitals. ^ Adopting the principles discussed in this paper should promote better use of a local IRBs time, money, and expertise for protecting the vulnerable population in their care. Without further improvements to the system, there is concern that private and commercial IRBs will attempt to create a monopoly on much of the clinical research in the future as they are not as heavily regulated and can therefore offer companies quicker and more convenient reviews. IRBs need to consider the advantages of charging for their unique and important services as a cost of doing business. More importantly, there must be a minimum standard of education for all IRB members in the area of the ethical standards of human research and a greater emphasis placed on the follow-up of ongoing research as this is the most critical time for study participants and may soon lead to the largest area for litigation. Additionally, there should be a centralized IRB for multi-site trials or a study website with important information affecting the trial in real time. There needs to be development of standards and metrics to assess the performance of the IRBs for quality assurance and outcome evaluations. The boards should not be content to run the business of human subjects' research without determining how well that function is actually being carried out. It is important that federally regulated IRBs provide excellence in human research and promote those values most important to the public at large.^

The Texas driver responsibility program: A preliminary analysis of the impact on impaired driving and trauma system funding

Objective. In 2003, the State of Texas instituted the Driver Responsibility Program (TDRP), a program consisting of a driving infraction point system coupled with a series of graded fines and annual surcharges for specific traffic violations such as driving while intoxicated (DWI). Approximately half of the revenues generated are earmarked to be disbursed to the state's trauma system to cover uncompensated trauma care costs. This study examined initial program implementation, the impact of trauma system funding, and initial impact on impaired driving knowledge, attitudes and behaviors. A model for targeted media campaigns to improve the program's deterrence effects was developed. ^ Methods. Data from two independent driver survey samples (conducted in 1999 and 2005), department of public safety records, state health department data and a state auditor's report were used to evaluate the program's initial implementation, impact and outcome with respect to drivers' impaired driving knowledge, attitudes and behavior (based on constructs of social cognitive theory) and hospital uncompensated trauma care funding. Survey results were used to develop a regression model of high risk drivers who should be targeted to improve program outcome with respect to deterring impaired driving. ^ Results. Low driver compliance with fee payment (28%) and program implementation problems were associated with lower surcharge revenues in the first two years ($59.5 million versus $525 million predicted). Program revenue distribution to trauma hospitals was associated with a 16% increase in designated trauma centers. Survey data demonstrated that only 28% of drivers are aware of the TDRP and that there has been no initial impact on impaired driving behavior. Logistical regression modeling suggested that target media campaigns highlighting the likelihood of DWI detection by law enforcement and the increased surcharges associated with the TDRP are required to deter impaired driving. ^ Conclusions. Although the TDRP raised nearly $60 million in surcharge revenue for the Texas trauma system over the first two years, this study did not find evidence of a change in impaired driving knowledge, attitudes or behaviors from 1999 to 2005. Further research is required to measure whether the program is associated with decreased alcohol-related traffic fatalities. ^