Financial incentives to perform medical procedures and laboratory tests: illustrative models of office practice

Financial return is one of several factors that may affect a physician's decision to order services for a patient. The extent of financial incentives to perform in-office medical procedures and laboratory tests is illustrated by four hypothetical models of general internal medicine office practice. The model practices consist of fixed ratios of history and physical examinations to return visits, with numbers and types of medical procedures and laboratory tests increasing stepwise through the four models. The procedures and tests included are an electrocardiogram, urinalysis, complete blood count, sigmoidoscopy, tuberculin skin test, two-view chest x-ray, cardiovascular treadmill stress test, and an automated 12-channel blood chemistry test. Charges and office expenses are estimated at 1977 Northern California levels. Net incomes derived for the four models are as follows: $31,000, $55,000; $60,000; and $90,000. The demonstrated financial incentives, which apply not only to internal medicine, but to all fields of medical care, are in conflict with policies that would emphasize personal rather than technical services. National health insurance proposals should include a continuing review of medical services valuation.

Use of out-of-plan services by Medicare members of HIP

Use of out-of-plan services in 1972 by Medicare members of the Health Insurance Plan of Greater New York (HIP) is examined in terms of the demographic and enrollment characteristics of out-of-plan users, types of services received outside the plan, and the relationship of out-of-plan to in-plan use. Users of services outside the plan tended to be more seriously ill and more frequently hospitalized than those receiving all of their services within the plan. The costs to the SSA of providing medical care to HIP enrollees are compared with analogous costs for non-HIP beneficiaries, and the implications for the organization and financing of health services for the aged are discussed.

The application of diagnostic specific cost profiles to cost and reimbursement control in hospitals

A system has been developed to generate hospital budgets based on the types of patients served. Several hundred classes of patients are defined according to clinical attributes such as diagnoses and surgical procedures, and for each class a profile of resources consumed is determined. The class definitions are based both on homogeneity of patient care processes as well as resource consumption. These profiles are expressed as revenues generated by charging departments and as costs both direct and indirect for all services. A methodology has been developed to associate all indirect costs with their source for each service included in the profile. From a forecast of patient load by class, budgets can be computed from the cost profiles and revenues determined from the charging profiles. Further analysis thus can include the effect of changes in case mix as well as changes in patient care processes. The effect on revenues of different reimbursement mechanisms can also be projected as a function of the case mix. The system is currently being implemented for demonstration and evaluation of the Yale-New Haven Hospital.

Health care reimbursement is federal taxation of tax-exempt providers

Under parallel financial circumstances, the health care provider and the tax-paying corporation show equal bottom lines--the corporation pays a tax, and the health institution has a similar amount withheld by the Social Security Administration. Regardless of how this withholding is explained or who administers it, a tax is still a tax.