An empirical examination of relative profitability in the nursing facility industry between ownership form and regionality in the state of Texas

The purpose of this research is to examine the relative profitability of the firm within the nursing facility industry in Texas. An examination is made of the variables expected to affect profitability and of importance to the design and implementation of regulatory policy. To facilitate this inquiry, specific questions addressed are: (1) Do differences in ownership form affect profitability (defined as operating income before fixed costs)? (2) What impact does regional location have on profitability? (3) Do patient case-mix and access to care by Medicaid patients differ between proprietary and non-profit firms and facilities located in urban versus rural regions, and what association exists between these variables and profitability? (4) Are economies of scale present in the nursing home industry? (5) Do nursing facilities operate in a competitive output market characterized by the inability of a single firm to exhibit influence over market price?^ Prior studies have principally employed a cost function to assess efficiency differences between classifications of nursing facilities. The inherent weakness in this approach is that it only considers technical efficiency. Not both technical and price efficiency which are the two components of overall economic efficiency. One firm is more technically efficient compared to another if it is able to produce a given quantity of output at the least possible costs. Price efficiency means that scarce resources are being directed towards their most valued use. Assuming similar prices in both input and output markets, differences in overall economic efficiency between firm classes are assessed through profitability, hence a profit function.^ Using the framework of the profit function, data from 1990 Medicaid Costs Reports for Texas, and the analytic technique of Ordinary Least Squares Regression, the findings of the study indicated (1) similar profitability between nursing facilities organized as for-profit versus non-profit and located in urban versus rural regions, (2) an inverse association between both payor-mix and patient case-mix with profitability, (3) strong evidence for the presence of scale economies, and (4) existence of a competitive market structure. The paper concludes with implications regarding reimbursement methodology and construction moratorium policies in Texas. ^

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. ^

Clinical and economic outcomes of serious postoperative infections following resection of common respiratory and gastrointestinal solid tumors

Unlike infections occurring during periods of chemotherapy-induced neutropenia, postoperative infections in patients with solid malignancy remain largely understudied. The purpose of this population-based study was to evaluate the clinical and economic burden, as well as the relationship of hospital surgical volume and outcomes associated with serious postoperative infection (SPI) – i.e., bacteremia/sepsis, pneumonia, and wound infection – following resection of common solid tumors.^ From the Texas Discharge Data Research File, we identified all Texas residents who underwent resection of cancer of the lung, esophagus, stomach, pancreas, colon, or rectum between 2002 and 2006. From their billing records, we identified ICD-9 codes indicating SPI and also subsequent SPI-related readmissions occurring within 30 days of surgery. Random-effects logistic regression was used to calculate the impact of SPI on mortality, as well as the association between surgical volume and SPI, adjusting for case-mix, hospital characteristics, and clustering of multiple surgical admissions within the same patient and patients within the same hospital. Excess bed days and costs were calculated by subtracting values for patients without infections from those with infections computed using multilevel mixed-effects generalized linear model by fitting a gamma distribution to the data using log link.^ Serious postoperative infection occurred following 9.4% of the 37,582 eligible tumor resections and was independently associated with an 11-fold increase in the odds of in-hospital mortality (95% Confidence Interval [95% CI], 6.7-18.5, P < 0.001). Patients with SPI required 6.3 additional hospital days (95% CI, 6.1 - 6.5) at an incremental cost of $16,396 (95% CI, $15,927–$16,875). There was a significant trend toward lower overall rates of SPI with higher surgical volume (P=0.037). ^ Due to the substantial morbidity, mortality, and excess costs associated with SPI following solid tumor resections and given that, under current reimbursement practices, most of this heavy burden is borne by acute care providers, it is imperative for hospitals to identify more effective prophylactic measures, so that these potentially preventable infections and their associated expenditures can be averted. Additional volume-outcomes research is also needed to identify infection prevention processes that can be transferred from higher- to lower-volume providers.^

Factors associated with home health care costs

Characteristics of Medicare-certified home health agencies in Texas and the contributions of selected agency characteristics on home health care costs were examined. Cost models were developed and estimated for both nursing and total visit costs using multiple regression procedures. The models included home health agency size, profit status, control, hospital-based affiliation, contract-cost ratio, service provision, competition, urban-rural input-price differences, and selected measures of patient case-mix. The study population comprised 314 home health agencies in Texas that had been certified at least one year on July, 1, 1986. Data for the analysis were obtained from Medicare Cost Reports for fiscal year ending between July 1, 1985 to June 30, 1986.^ Home health agency size, as measured by the logs of nursing and total visits, has a statistically significant negative linear relationship with nursing visit and total visit costs. Nursing and total visit costs decrease at a declining rate as size increases. The size-cost relationship is not altered when controlling for any other agency characteristic. The number of visits per patient per year, a measure of patient case-mix, is also negatively related to costs, suggesting that costs decline with care of chronic patients. Hospital-based affiliation and urban location are positively associated with costs. Together, the four characteristics explain 19 percent of the variance in nursing visit costs and 24 percent of the variance in total visit costs.^ Profit status and control, although correlated with other agency characteristics, exhibit no observable effect on costs. Although no relationship was found between costs and competition, contract cost ratio, or the provision on non-reimburseable services, no conclusions can be made due to problems with measurement of these variables. ^

HEALTH CARE COST INCREASES IN METROPOLITAN AREAS

The research project is an extension of the economic theory to the health care field and health care research projects evaluating the influence of demand and supply variables upon medical care inflation. The research tests a model linking the demographic and socioeconomic characteristics of the population, its community case mix, and technology, the prices of goods and services other than medical care, the way its medical services are delivered and the health care resources available to its population to different utilization patterns which, consequently, lead to variations in health care prices among metropolitan areas. The research considers the relationship of changes in community characteristics and resources and medical care inflation.^ The rapidly increasing costs of medical care have been of great concern to the general public, medical profession, and political bodies. Research and analysis of the main factors responsible for the rate of increase of medical care prices is necessary in order to devise appropriate solutions to cope with the problem. An understanding of the community characteristics and resources-medical care costs relationships in the metropolitan areas potentially offers guidance in individual plan and national policy development.^ The research considers 145 factors measuring community milieu (demographic, social, educational, economic, illness level, prices of goods and services other than medical care, hospital supply, physicians resources and techological factors). Through bivariate correlation analysis, the number of variables was reduced to a set of 1 to 4 variables for each cost equation. Two approaches were identified to track inflation in the health care industry. One approach measures costs of production which accounts for price and volume increases. The other approach measures price increases. One general and four specific measures were developed to represent each of the major approaches. The general measure considers the increase on medical care prices as a whole and the specific measures deal with hospital costs and physician's fees. The relationships among changes in community characteristics and resources and health care inflation were analyzed using bivariate correlation and regression analysis methods. It has been concluded that changes in community characteristics and resources are predictive of hospital costs and physician's fees inflation, but are not predictive of increases in medical care prices. These findings provide guidance in the formulation of public policy which could alter the trend of medical care inflation and in the allocation of limited Federal funds.^

Seroprevalence of toxoplasmosis and current thinking regarding screening in pregnancy: A review of the literature and case study discussion

The approach to the diagnosis and treatment of congenital toxoplasmosis has been one of flux and debate, fueled by lack of knowledge, lack of consensus, different methods of screening and different national policies for screening in different parts of the world. Countries with higher prevalence of disease such as in Europe and South America have a heightened awareness of the need to screen and treat for this parasitic infection during pregnancy. In contrast, in the United States, it is a condition scarcely discussed and has been largely ignored except in some large centers and by a few researchers. Policies and research strategies for any condition should start with obtaining good data. The aims of this thesis included a review of prevalence studies conducted in the United States, focused on the past 20 years, combined with a description of original research conducted by the author several years ago. The latter was a cross-sectional study performed in Houston, one of the largest American cities with a great ethnic mix. The study analyzed prevalence rates of Toxoplasma gondii IgG antibody in sera of women of reproductive age. Overall seroprevalence was 12.3%. In keeping with other studies, higher prevalence correlated with lower socioeconomic status, Black and Hispanic and Asian ethnicities, and increasing age. A literature search revealed only three prevalence studies performed in the United States over the past 20 years, with another four studies only referred to as personal communications or within a textbook, without further study detail available. The literature review also revealed a lack of consensus on whether or not to screen for toxoplasmosis in pregnancy, and even whether or not treatment in utero is worthwhile.^ Proponents of screening and treatment in pregnancy site studies both in the United States and France, emphasize that treatment reduces disease manifestations in infants. Opponents cite other studies that show only marginal benefits, together with potential side effects of medication regimens and generation of anxiety in parents. What is agreed on so far is the value of educating pregnant women on how to avoid contracting toxoplasmosis, and educating physicians on making the best use of reference laboratories before major treatment decisions are made. Further research to reevaluate the literature critically, review new treatment regimens and examine costs and benefits of screening and treatment of toxoplasmosis in pregnancy, bringing together European and American researchers, is needed.^