Do hospitals cross-subsidize?

US Hospital Service Availability and New 340B Program Participation

Importance

The US 340B Drug Pricing Program enables eligible hospitals to receive substantial discounts on outpatient drugs to improve hospitals' financial sustainability and maintain access to care for patients who have low income and/or are uninsured. However, it is unclear whether hospitals use program savings to subsidize access as intended.

Objective

To evaluate whether the 340B program is associated with improvements in access to hospital-based services and to test whether the association varies by hospital ownership.

Design, Setting, and Participants

Difference-in-differences and cohort analysis from 2010 to 2019. Never and newly participating 340B general, acute, nonfederal hospitals in the US using data from the American Hospital Association's Annual Survey of Hospitals merged with hospital and market characteristics. Data were analyzed from January 1, 2023, to January 31, 2024.

Exposures

New enrollment in 340B between 2012 and 2018.

Main Outcomes and Measures

Total number of unprofitable service lines, ie, substance use, psychiatric (inpatient and outpatient), burn clinic, and obstetrics services; and profitable services, ie, cardiac surgery and orthopedic, oncologic, neurologic, and neonatal intensive services.

Results

The study sample comprised a total of 2152 hospitals, 1074 newly participating and 1078 not participating in the 340B program. Participating hospitals were more likely than nonparticipating hospitals to be critical access and teaching hospitals, have higher Medicaid shares, and be located in rural areas and in Medicaid expansion states. At public hospitals, participation in the 340B program was associated with a significant increase in total unprofitable services (0.21; 95% CI, 0.04 to 0.38; P = .02) and marginal increases in substance use (5.4 percentage points [pp]; 95% CI, -0.8 pp to 11.6 pp; P = .09) and inpatient psychiatric (6.5 pp; 95% CI, -0.7 pp to 13.7 pp; P = .09) services. Among nonprofit hospitals, there was no significant association between 340B and service offerings (profitable and unprofitable) except for an increase in oncologic services (2.5 pp; 95% CI, 0.0 pp to 5.0 pp; P = .05).

Conclusions and Relevance

The finding of the cohort study indicate that participation in the 340B program was associated with an increase in unprofitable services among newly participating public hospitals. Nonprofit hospitals were largely unaffected. These findings suggest that public hospitals responded to 340B savings by improving patient access, whereas nonprofits did not. This heterogeneous response should be considered when evaluating the eligibility criteria for the 340B program and how it affects social welfare.

Pricing of hospital services: evidence from a thematic review

The management implications of pricing healthcare services, especially hospitals, have received insufficient scholarly attention. Additionally, disciplinary overlaps have led to scattered academic efforts in this domain. This study performs a thematic synthesis of the literature and applies retrospective analysis to hospital service pricing articles to address these issues. The study's inputs were sourced from well-known online repositories, using a structured search string and PRISMA flow chart to select the pertinent documents. Our thematic analysis of pricing literature encompasses: (a) comprehension of hospital service pricing nature; (b) pricing objectives, strategies and practices differentiation; (c) presentation of factors impacting hospital service pricing. We observe that hospital pricing is an intricate and unclear matter. The terms 'pricing strategies' and 'pricing practices' are often used interchangeably in academic literature. Hospital service pricing is influenced by costs, demand and supply factors, market structure, pricing regulation and third-party reimbursements. The study's findings provide policy implications for service pricing in hospitals, in addition to suggesting avenues for future research on hospital pricing.

Price spillovers and specialization in health care: The case of children's hospitals

Specialty hospitals tend to negotiate higher commercial insurance payments, even for relatively routine procedures with comparable clinical quality across hospital types. How specialty hospitals can maintain such a price premium remains an open question. In this paper, we examine a potential (horizontal) differentiation effect in which patients perceive specialty hospitals as sufficiently distinct from other hospitals, so that specialty hospitals effectively compete in a separate market from general acute care hospitals. We estimate this effect in the context of routine pediatric procedures offered by both specialty children's hospitals as well as general acute care hospitals, and we find strong empirical evidence of a differentiation effect in which specialty children's hospitals appear largely immune to competitive forces from non-children's hospitals.

Hospital concentration and low-income populations: Evidence from New York State Medicaid

While a large body of evidence has examined hospital concentration, its effects on health care for low-income populations are less explored. We use comprehensive discharge data from New York State to measure the effects of changes in market concentration on hospital-level inpatient Medicaid volumes. Holding fixed hospital factors constant, a one percent increase in HHI leads to a 0.6% (s.e. = 0.28%) decrease in the number of Medicaid admissions for the average hospital. The strongest effects are on admissions for birth (-1.3%, s.e. = 0.58%). These average hospital-level decreases largely reflect redistribution of Medicaid patients across hospitals, rather than overall reductions in hospitalizations for Medicaid patients. In particular, hospital concentration leads to a redistribution of admissions from non-profit hospitals to public hospitals. We find evidence that for births, physicians serving high shares of Medicaid beneficiaries in particular experience reduced admissions as concentration increased. These reductions may reflect preferences among these physicians or reduced admitting privileges by hospitals as a means to screen out Medicaid patients.

Understanding the relationship between nonprofit hospital community benefit spending and system membership: An analysis of independent hospital acquisitions

The Internal Revenue Service (IRS) requires nonprofit hospitals to report community benefit spending to justify their nonprofit tax exemption. We examined whether nonprofit hospital acquisitions influence the amount and type community benefit spending. We analyzed 2011-2018 data on urban, nonprofit hospitals. The analysis dataset included 57 hospitals that were acquired and a matched control group. We estimated difference-in-differences specifications to measure the effect of acquisitions on total community benefit spending, and three subcategories - clinical, population health, and other spending types. We found that acquisitions led to decreased population health spending (-$0.32 million, p < 0.01) and other spending categories (-$1.5 million, p < 0.05), but no significant change in total or clinical spending. If the acquirer was located out-of-state, total community benefit spending declined by $2.4 million (p < 0.10). Our findings support the need for community benefit spending to be considered, along with quality, efficiency, and prices, when evaluating the welfare impact of acquisitions.

Association Between Medicaid Expansion And Closure Of Hospital-Based Obstetric Services

Access to obstetric services has declined steadily during the past decade, driven by the closure of hospital-based obstetric units and of entire hospitals. A fundamental challenge to maintaining obstetric services is that they are frequently unprofitable for hospitals to operate, threatening hospital viability. Medicaid expansion has emerged as a possible remedy for obstetric service closure because it reduces uncompensated care and improves hospital finances. Using national hospital data from the period 2010-18, we assessed the relationship between Medicaid expansion and obstetric service closure in rural and urban communities. We found that expansion led to a large reduction in hospital closures; however, this effect was concentrated among hospitals that did not have obstetric units. Considering closure of obstetric units, we found that rural obstetric units were less likely to close immediately after expansion, but this effect faded within two years. Overall, our findings suggest that Medicaid expansion had little effect on the closure of obstetric services. Policies supporting access to obstetric care may need to directly address the financial challenges specific to this service line.

Physician investment in hospitals: Specialization, selection, and quality in cardiac care

Physician ownership of hospitals involves several competing economic forces. Physician-owners may be incentivized to "cherry-pick" and treat profitable patients at their facilities. However, physician-owned hospitals are often specialized and may provide higher-quality care for well-matched patients. Using multiple identification approaches, I document no significant mortality improvement for cardiac patients treated at physician-owned hospitals. Using aggregate data on ownership to infer physician-owner preferences in a hospital choice model, my results rule out significant cherry-picking within physician-owners' patient populations. However, both facility location and a healthier overall patient population among physician-owners drive advantageous selection of patients into physician-owned hospitals.

340B Drug Pricing Program and hospital provision of uncompensated care

OBJECTIVES

To evaluate whether hospital entry into the 340B Drug Pricing Program, which entitles eligible hospitals to discounts on drug purchases and intends for hospitals to use associated savings to devote more resources to the care of low-income populations, is associated with changes in hospital provision of uncompensated care.

STUDY DESIGN

We analyzed secondary data on 340B participation and uncompensated care provision among general acute care hospitals and critical access hospitals from 2003 to 2015. We constructed an annual, hospital-level data set on hospital 340B participation from the Office of Pharmacy Information Systems and on uncompensated care provision from the Hospital Cost Reporting Information System.

METHODS

Focusing on 2 periods of program expansion, we separately analyzed trends in uncompensated care costs for 340B-eligible general acute care hospitals and critical access hospitals, stratified by year of 340B program entry, including a stratum of eligible hospitals that never participated. We used a differences-in-differences approach to quantify whether there were differential changes in provision of uncompensated care after hospitals enter the 340B program relative to hospitals that did not participate or had not yet entered.

RESULTS

We do not find evidence that hospitals increased provision of uncompensated care after entry into the 340B program differentially more than hospitals that never entered or had not yet entered the program.

CONCLUSIONS

Relying on hospitals to invest surplus into care for the underserved without marginal incentives to do so or strong oversight may not be an effective strategy to expand safety-net care.

The Impact of Halting Elective Admissions in Anticipation of a Demand Surge Due to the Coronavirus Pandemic (COVID-19)

BACKGROUND

In anticipation of a demand surge for hospital beds attributed to the coronavirus pandemic (COVID-19) many US states have mandated that hospitals postpone elective admissions.

OBJECTIVES

To estimate excess demand for hospital beds due to COVID-19, the net financial impact of eliminating elective admissions in order to meet demand, and to explore the scenario when demand remains below capacity.

RESEARCH DESIGN

An economic simulation to estimate the net financial impact of halting elective admissions, combining epidemiological reports, the US Census, American Hospital Association Annual Survey, and the National Inpatient Sample. Deterministic sensitivity analyses explored the results while varying assumptions for demand and capacity.

SUBJECTS

Inputs regarding disease prevalence and inpatient utilization were representative of the US population. Our base case relied on a hospital admission rate reported by the Center for Disease Control and Prevention of 137.6 per 100,000, with the highest rates in people aged 65 years and older (378.8 per 100,000) and 50-64 years (207.4 per 100,000). On average, elective admissions accounted for 20% of total hospital admissions, and the average rate of unoccupied beds across hospitals was 30%.

MEASURES

Net financial impact of halting elective admissions.

RESULTS

On average, hospitals COVID-19 demand for hospital bed-days fell well short of hospital capacity, resulting in a substantial financial loss. The net financial impact of a 90-day COVID surge on a hospital was only favorable under a narrow circumstance when capacity was filled by a high proportion of COVID-19 cases among hospitals with low rates of elective admissions.

CONCLUSIONS

Hospitals that restricted elective care took on a substantial financial risk, potentially threatening viability. A sustainable public policy should therefore consider support to hospitals that responsibly served their communities through the crisis.

A moneymaking scan: Dual reimbursement systems and supplier-induced demand for diagnostic imaging

In complex health systems with growing healthcare spending, combining reimbursement systems that incentivize cost-efficient healthcare provision within and across care sectors is key. This study investigates whether dual reimbursement systems lead hospitals to offset financial pressures in one care sector by inducing demand in another. We find that hospital imaging units induced demand for costly and unnecessary ambulatory imaging examinations reimbursed under fee-for-service, following a reform that introduced prospective payment and increased competition in the inpatient sector in Switzerland in 2012. Market structure, competitive pressures, and price regulations also influence demand inducement by varying the response to the reform. Reimbursement systems can influence supplier-induced demand in other care sectors within hospitals where revenue is tied to the intensity of care provision. In particular, the possibility to self-refer patients to high-margin diagnostic examinations bears negative consequences on healthcare expenditures and potentially patient health.

Hospital Ownership and Hospital Institutional Change: A Qualitative Study in Guizhou Province, China

Objectives: To qualitatively compare the influence of different ownership which is considered as a kind of institutional environment in public hospitals, private hospitals, and mixed-ownership hospitals on hospital governance structure and organizational behavior. Design: Qualitative descriptive study, using semi-structured, in-depth interviews and thematic template analysis, theoretically informed by critical realism. Participants: 27 key informants including national policymakers in charge of the health sector, influential researchers, local administrators responsible for implementing policies, and hospital managers who are experienced in institutional change. Results: Hospital ownership has a significant influence on hospitals in terms of decision-making power allocation, residual ownership allocation, market entry level, accountability, and social functions. These five aspects in hospital organizational structure incentivize hospitals to adapt to the internal and external environment of the hospital organization-such as market environment, governance, and financing arrangements-affect the behavior of the hospital organization, and ultimately affect the efficiency of hospital operation and quality of service. The incentives under the public system are relatively distorted. Private hospitals have poor performance in failing their social functions due to their insufficient development ability. Compared to them, mixed ownership hospitals have a better performance in terms of incentive mechanism and organizational development. Conclusion: Public hospitals should improve the governance environment and decision-making structure, so as to balance their implementation of social functions and achieve favorable organizational development. For private hospitals, in addition to the optimization of the policy environment, attempts should be made to strengthen their supervision. The development of mixed-ownership hospitals should be oriented towards socialized governance.