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<p><strong>You Are Here:</strong> <span class="crumb_link"><a href="/" class="crumb_link">AHRQ Archive Home</a> &gt; <a href="/research/resarch.htm" class="crumb_link"><em>Research Activities</em> Archive</a> &gt; <a href="." class="crumb_link">July/August 1996</a>
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<td><h1><a name="h1" id="h1"></a> Health Care Costs and Financing </h1>
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<td><div id="centerContent"><div class="headnote">
<p>This information is for reference purposes only. It was current when produced and may now be outdated. Archive material is no longer maintained, and some links may not work. Persons with disabilities having difficulty accessing this information should contact us at: <a href="https://info.ahrq.gov/">https://info.ahrq.gov</a>. Let us know the nature of the problem, the Web address of what you want, and your contact information. </p>
<p>Please go to <a href="https://www.ahrq.gov/">www.ahrq.gov</a> for current information.</p></div>
<a name="head1"></a><h2>Medicaid reimbursement affects nursing home
staffing levels
and quality of care</h2>
<p>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.</p><p>
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.</p>
<p>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.</p><p>
For more information see "The effect of Medicaid reimbursement on
quality of care in nursing homes" by Drs. Cohen and Spector in
the <em>Journal of Health Economics</em> 15, pp. 223-48, 1996.
Reprints
(AHCPR Publication No. 96-R116) are available from AHCPR.</p>
<a name="head2"></a><h2>Health insurance plans vary in coverage
review process for
new medical technology</h2>
<p>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.</p><p>
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.</p>
<p>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.</p><p>
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.</p>
<p>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.</p><p>
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
<em>Journal of Technology Assessment in Health Care</em> 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
<em>Journal of General Internal Medicine</em> 11, pp. 294-302.</p>
<a name="head3"></a><h2>High costs for the most sophisticated trauma
centers
support limiting the number of such centers</h2>
<p>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.</p><p>
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.</p>
<p>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.</p><p>
For more information, see "Trauma systems and the costs of trauma
care," by Drs. Goldfarb, Bazzoli, and Coffey, in the April 1996
issue of <em>HSR: Health Services Research</em> 31(1), pp.
71-95.</p>
<p class="size2"><a href=".">Return to Contents</a><br />
<a href="dept3.htm">Proceed to Next Section</a></p>
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<p> The information on this page is archived and provided for reference purposes only.</p></div>
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