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Midterm 2 Review

G bba pps lead to increase in percent of hospitals

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New gov’t imposed payment structures (e.g. BBA, PPS) lead to increase in percent of hospitals with negative total margins When gov’t programs (Medicaid/care) pay less, hospitals charge private payers more; negative correlation
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Not consistent with profit maximizing economic theory Demography 5,724 Hospitals 4,973 short-term general hospitals Nonprofit 58% (2,903); For-profit 21% (1,025); State and local gov’t 21% (1,045) 797,403beds in community hospitals Nonprofits have ~70% of beds, larger facilities Hill-Britton Act after WWII, Fed matching would only go to nonprofit and gov’t hospitals Increase in share of hospital bed in For-profit hospitals, decrease in gov’t hospitals’ share Medicare/aid fixed access problem, uninsured used to go to gov’t hospitals, but not enough so needed to insure so they’d be able to go to other hospitals Gov’t in role of financing instead of providing healthcare Payment Methods FFS/percentage of charges: Payment based on each test/procedure; ins Hospital, incentives high for higher LOS Per Diem Rates: Payment inclusive of all service for a single day; ins Hospital DRGs (Care Rates): Prospective payment based on a bundle of tests and procedures under a diagnosis; Medicare/Medicaid, Private Ins Hospital; low incentives to keep patients, thus lower LOS Chargemaster- list of hospital’s prices for every single procedure and supply item Totals of bills bear little relationship to amounts paid by third party payers (usually less than half) or even actual cost (different markups) Medicare Prospective Payment DRGs Pay fixed price per admission Expanded from 538 to 745 DRGs in 2007 to improve accuracy Led to reduction in growth rate of Medicare inpatient expenditures Outlier payments for patients way off chart Hospital responses Reduction of inpatient LOS Gaming of DRGs to higher codes (DRG creep, diagnosis assignment based on services provided, thus can tailor services to up code) Admitting less sick patients Make new hospitals that focus on procedures that provide best payment margins Medicaid Reimbursement Flat fee for DRG Usually % of Medicare DRG Rates set by States Cuts in Medicaid reimbursement used to pay for ACA, which will be hard to allow to stand because hospitals are already currently barely marginally profitable Private Health Insurance Private payments generally negotiated every couple of years between insurer and hospital (2- 5 year contract)
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Generally considered proprietary information Bargaining power determined by how important agreement is to both parties Hospitals have high fixed costs Consumer preference for plan with lots of providers Enrollees willingness to switch plans to have access to certain hospitals Hospital occupancy rate and market structure (hospitals need high occupancy rate; how many hospitals/insurers and how competitive) Most favored customer clauses (can’t charge less to other companies) Competition Non-price competition between nonprofits to be most prestigious – Medical Arms Race
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