Market and regulatory influences on the availability of coronary angioplasty and bypass surgery in U.S. hospitals

The Effect of Hospital Market Competition on the Adoption of Transcatheter Aortic Valve Replacement

BACKGROUND

The use of transcatheter aortic valve replacement (TAVR) has grown rapidly. The purpose of this study was to assess whether hospital market competition was associated with the use of TAVR.

METHODS

We used 5 Healthcare Cost and Utilization Project state inpatient databases (Arizona, Florida, Iowa, Massachusetts, Washington) to identify patients undergoing TAVR (n = 5563) or surgical aortic valve replacement (n = 30,672) across 154 hospitals from 2011 to 2014. Using the Herfindahl-Hirschman Index (HHI) to calculate market competition, hospitals were categorized into commonly used categories of low (HHI >0.25), moderate (HHI 0.15-0.25), and high (HHI <0.15) competition. We associated market competition category with TAVR utilization using hierarchical logistic regression, adjusting for patient characteristics, hospital characteristics, year, and hospital random effect. We modeled associations between HHI category and in-hospital mortality, admission length of stay, and discharge to home as secondary outcomes.

RESULTS

After adjustment, patients treated at high-competition hospitals had higher odds of receiving TAVR, relative to patients at low-competition hospitals (adjusted odds ratio [ORadj], 5.31; 95% confidence interval [CI], 2.10-13.4). TAVR use increased each year (ORadj, 1.73; 95% CI, 1.38-2.17) but was similar across HHI categories. Competition was not associated with in-hospital mortality or length of stay. Patients at high-competition hospitals were more likely to be discharged home (ORadj, 2.39; 95% CI, 1.23-4.66) compared with patients at low-competition hospitals.

CONCLUSIONS

Market competition was positively associated with a hospital's adoption of TAVR. Future studies should further examine the impact of competition on quality and appropriateness.

Competition in the Dutch hospital sector: an analysis of health care volume and cost

This paper evaluates the impact of market competition on health care volume and cost. At the start of 2005, the financing system of Dutch hospitals started to be gradually changed from a closed-end budgeting system to a non-regulated price competitive prospective reimbursement system. The gradual implementation of price competition is a 'natural experiment' that provides a unique opportunity to analyze the effects of market competition on hospital behavior. We have access to a unique database, which contains hospital discharge data of diagnosis treatment combinations (DBCs) of individual patients, including detailed care activities. Difference-in-difference estimates show that the implementation of market-based competition leads to relatively lower total costs, production volume and number of activities overall. Difference-in-difference estimates on treatment level show that the average costs for outpatient DBCs decreased due to a decrease in the number of activities per DBC. The introduction of market competition led to an increase of average costs of inpatient DBCs. Since both volume and number of activities have not changed significantly, we conclude that the cost increase is likely the result of more expensive activities. A possible explanation for our finding is that hospitals look for possible efficiency improvements in predominantly outpatient care products that are relatively straightforward, using easily analyzable technologies. The effects of competition on average cost and the relative shares of inpatient and outpatient treatments on specialty level are significant but contrary for cardiology and orthopedics, suggesting that specialties react differently to competitive incentives.

The evolving science of quality measurement for hospitals: implications for studies of competition and consolidation

The literature on hospital competition and quality is young; most empirical studies have focused on few conditions and outcomes. Measures of in-hospital mortality and complications are susceptible to bias from unmeasured severity and transfer/discharge practices. Only one research team has evaluated related process and outcome measures, and none has exploited chart-review or patient survey-based data. Prior studies have generated inconsistent findings, suggesting the need for additional research. We describe the strengths and limitations of various approaches to quality measurement, summarize how quality has been operationalized in studies of hospital competition, outline three mechanisms by which competition may affect hospital quality, and propose measures appropriate for testing each mechanism.

Regionalization and the underuse of angiography in the Veterans Affairs Health Care System as compared with a fee-for-service system

BACKGROUND

Policies to concentrate or regionalize invasive procedures at high-volume medical centers are under active consideration. Such policies could improve outcomes among those who undergo procedures while increasing their underuse among those who never reach such centers. We compared the underuse of needed angiography after acute myocardial infarction in a traditional Medicare fee-for-service system with underuse in the regionalized Department of Veterans Affairs (VA) health care system.

METHODS

We studied 1665 veterans from 81 VA hospitals and 19,305 Medicare patients from 1530 non-VA hospitals, all of whom were elderly men. We compared adjusted angiography use and one-year mortality among patients for whom angiography was rated as clinically needed. We compared underuse in models before and after controlling for the on-site availability of cardiac procedures.

RESULTS

After adjustment for the need for angiography, underuse was present in both groups, but VA patients remained significantly less likely than Medicare patients to undergo angiography (43.9 percent vs. 51.0 percent; odds ratio, 0.75; 95 percent confidence interval, 0.57 to 0.96). After also controlling for on-site availability of cardiac procedures at the admitting hospital, we found no significant difference in the underuse of angiography among VA patients as compared with Medicare patients (odds ratio, 1.02; 95 percent confidence interval, 0.82 to 1.26) or in one-year mortality (odds ratio, 1.08; 95 percent confidence interval, 0.89 to 1.28).

CONCLUSIONS

There is underuse of needed angiography after acute myocardial infarction in both the VA and Medicare systems, but the rate of underuse is significantly higher in the VA. These differences appear to be associated with limited on-site availability of cardiac procedures in the regionalized VA health care system. Further work should focus on how regionalization policies could be improved with effective referral and triage processes.

Consumer information, price, and nonprice competition among hospitals

The results of the empirical analysis in this paper indicate that broadly defined hospital quality declines in more concentrated markets. The direction of the effect of concentration on hospital charges is smaller and the direction is less clear. Prices are little, if any, lower in more concentrated markets. Hospital price-cost margins are higher in more concentrated markets. Higher concentration discourages price competition. The data do not support the increasing monopoly theory. Further, since hospital price-cost margins do not appear to remain constant, we must reject the redundant resources theory as well, though its stress on nonprice competition rings true. The empirical results are consistent with the traditional antitrust theory. In addition, consumer information plays a surprisingly important role. Consumer information is important in explaining hospital prices, and less important in hospital quality. Consumers are not passive; they do play a role in hospital choice. It is likely that more recent innovations in health insurance will increase consumer awareness. With an increase in consumer copayments, and more active insurer contracting, it is likely that future hospital competition is more likely to stress price, and future antitrust activity could lead to price reductions in addition to declining hospital price-cost margins.

Selection of a cardiac surgery provider in the managed care era

OBJECTIVE

Many health planners promote the use of competition to contain cost and improve quality of care. Using a standard econometric model, we examined the evidence for "value-based" cardiac surgery provider selection in eastern Massachusetts, where there is significant competition and managed care penetration.

METHODS

McFadden's conditional logit model was used to study cardiac surgery provider selection among 6952 patients and eight metropolitan Boston hospitals in 1997. Hospital predictor variables included beds, cardiac surgery case volume, objective clinical and financial performance, reputation (percent out-of-state referrals, cardiac residency program), distance from patient's home to hospital, and historical referral patterns. Subgroup analyses were performed for each major payer category.

RESULTS

Distance from patient's home to hospital (odds ratio 0.90; P =.000) and the historical referral pattern from each patient's hometown (z = 45.305; P =.000) were important predictors in all models. A cardiac surgery residency enhanced the probability of selection (odds ratio 5.25; P =.000), as did percent out-of-state referrals (odds ratio 1.10; P =.001). Higher mortality rates were associated with decreased probability of selection (odds ratio 0.51; P =.027), but higher length of stay was paradoxically associated with greater probability (odds ratio 1.72; P =.000). Total hospital costs were irrelevant (odds ratio 1.00; P =.179). When analyzed by payer subgroup, Medicare patients appeared to select hospitals with both low mortality (odds ratio 0.43; P =.176) and short length of stay (odds ratio 0.76; P =.213), although the results did not achieve statistical significance. The commercial managed care subgroup exhibited the least "value-based" behavior. The odds ratio for length of stay was the highest of any group (odds ratio = 2.589; P =.000) and there was a subset of hospitals for which higher mortality was actually associated with greater likelihood of selection.

CONCLUSIONS

The observable determinants of cardiac surgery provider selection are related to hospital reputation, historical referral patterns, and patient proximity, not objective clinical or cost performance. The paradoxic behavior of commercial managed care probably results from unobserved choice factors that are not primarily based on objective provider performance.

Costs for acute myocardial infarction in a tertiary care centre and nationwide in France

OBJECTIVE

We compared the estimated costs of coronary interventions from our hospital's cost accounting system with data from the French Diagnosis Related Group (DRG) cost database, taking the perspective of our hospital.

DESIGN

Cost data on hospital resources used by patients hospitalised for acute myocardial infarction (MI), with and without complications, including deceased patients, were collected in a tertiary care university hospital located in Paris, France. The data were collected using the hospital's cost accounting system and then compared with the estimates provided by the DRG reimbursement schedule for similar conditions.

MAIN OUTCOME MEASURES AND RESULTS

The estimated costs were 849 euro (EUR) for coronary angiography, EUR4762 for coronary angioplasty with stenting, and EUR4978 to 8067 for MI. The DRG reimbursement schedule provided for acute MI was EUR3920 to 5709.

CONCLUSIONS

Although the current cost of treating acute MI in a teaching hospital is reasonably close to that in the current reimbursement schedule, rapid technological changes regarding both drugs and devices renders necessary a close monitoring of costs associated with the management of these acute care patients.

The composition of rural hospital medical staffs: the influence of hospital neighbors

The local supply of physicians has a strong influence on the availability and the quality of services provided by rural hospitals. Nevertheless, there are no published studies that describe the composition of rural hospital medical staffs and, in particular, the availability of specialists on these staffs. This study uses 1991 and 1994 survey data from rural hospitals located in eight states to describe the specialty composition and factors that influence the presence of specialists on rural hospital medical staffs. The results show a strong, positive association between the level of medical staff specialization in rural hospitals and the level of medical specialization of their closet rural neighbors, which suggests there is competition among rural hospitals based on the composition of the hospital medical staff. Analysis by specialty type, however, indicates that the degree of competition may differ for different types of specialists.

Pay in the British NHS: a local solution for a national service?

An important component of the reforms of the British National Health Service (NHS) has been devolution of a previously highly centralised pay bargaining system to the local provider level. As the wage bill is by far the single largest item of health care expenditure, the implications of this change may be far-reaching. This article surveys the available theory and evidence from an economic perspective. It reviews the development of pay determination mechanisms in the NHS and the extent to which local pay has been adopted since the reforms were introduced. It then considers the theory of local pay and general evidence on local pay variations in the UK, before turning to the available evidence on local labour markets in the health care sectors of the UK and USA. It concludes with a discussion of the policy and research implications of current developments on local pay bargaining in the NHS. In particular, it suggests that judgements over the success or failure of local pay bargaining will concern: first, whether the weakened monopsony position of the NHS at national level results in higher pay for the more powerful employee groups; second, whether fragmentation of bargaining weakens the negotiating and lobbying power of national trade unions and professional organisations; third, whether competition between providers leads to higher or lower costs; and fourth, whether any efficiency gains from local bargaining outweight the higher transaction costs involved.

The relationship between the supply of cardiac catheterization laboratories, cardiologists and the use of invasive cardiac procedures in northern New England

OBJECTIVES

Utilization rates of coronary angiography and cardiac revascularization have been found to vary between areas. This study addresses the relationship between resource supply and procedure rates.

METHODS

We compared the association of per capita catheterization laboratories, per capita cardiologists and multi-provider markets (where more than one hospital offers coronary angiography services) with the utilization rates for angiography and cardiac revascularization in northern New England, USA. Administrative data were used to capture invasive cardiac procedures. Small area analyses were used to create coronary angiography service areas. Linear regression methods were used to measure associations between the resource supply and utilization rates.

RESULTS

Variation in the use of invasive cardiac procedures was strongly associated with the population-based availability of catheterization facilities and multi-provider markets and unrelated to cardiologist supply or need (as reflected in the hospitalization rates for myocardial infarction). In the multivariate model, an increase of 1 catheterization laboratory per 100,000 population was associated with an increase in the angiography rate of 1.62 per 1000 population; those service areas with multi-provider markets were associated with an additional increase in the angiography rate of 1.27 per 1000 population (R2 = 0.84, P = 0.0006). There was a moderately strong relationship between the catheterization laboratories per capita and the revascularization rates (R2 = 0.43, P = 0.029). Angiography rates were highly associated with cardiac revascularization rates: an increase in the angiography rate of 1 per 1000 population was associated with a 0.46 per 1000 increase in the cardiac revascularization rate (R2 = 0.85, P = 0.0001).

CONCLUSIONS

Our work suggests that current efforts to address variation in cardiac procedures through activities such as appropriateness criteria, guidelines and utilization review are misdirected and should be redirected towards capacity, in this case the supply of catheterization facilities.

International comparisons of critical care outcome and resource consumption

Though there are reasonable data to suggest that certain countries, such as the United States, spend considerably more money on the provision of critical care services than others, there is little information regarding the added benefits accrued with this additional expense. Studies to date have suggested little if no difference in outcome but have been limited in their size, design, and choice of outcome measures. Furthermore, significant underlying societal priorities and philosophy may dictate that the optimal critical care delivery system is different for different countries. With the increasing availability of large patient databases, however, it will be more feasible in the future to design and conduct assessments of critical care delivery systems between countries taking appropriate account of the choice of study design, definition of at-risk populations, and choice of valuable measures of output and cost. The results of such assessments will hopefully drive wiser decision making in the design and management of critical care delivery systems worldwide.

Physician-hospital integration and the economic theory of the firm

Physicians and hospitals are pioneering new and more coordinated organizational forms under pressure from market competition. Arms-length "doctor's workshop" relationships are yielding to integrated delivery systems and contractual delivery networks. This article analyzes organizational change in health care through the conceptual lens of institutional economics, defined broadly as including agency theory, transactions cost economics, and the dynamic capabilities view of the firm. These theoretical frameworks highlight three distinct functions of organization under managed care: coordination, governance, and innovation.

Managed care and open-heart surgery facilities in California

More than 25 percent of hospitals in California that offer open-heart surgery performed fewer than the number recommended by minimum volume guidelines in 1991. This DataWatch examines the characteristics of these hospitals and the patients they treat. The analysis suggests that the market share of these providers has remained constant over recent years, despite substantial growth in managed care. Simple explanations--for example, that these hospitals are serving isolated geographic markets or are hospitals in transition--do not explain the phenomenon. Medicare beneficiaries represent approximately half of the patient volume at these facilities. Health maintenance organizations (HMOs) are more likely to send their enrollees to high-volume facilities.

Competition among hospitals in the United States

The value added by acute-care hospitals is in the form of specific procedures (therapy, operations, testing) and the bed care necessary to make the procedures effective. When more than one hospital exists in a local area (defined in many studies as a radius of 15 mi/24 km) they compete for market share, since greater market share has a positive effect on economies of scale, utilization rates, learning curves and levels of quality. Competition is not only with other hospitals (and 75% of all hospitals do have a competitor within 24 km), but also with doctors who now perform some procedures in their offices, and with specialized clinics. The first strategy is to attract physician allegiance since they act as gate-keepers, directing patients to specific hospitals. This is done through personal amenities, professional amenities and enhancement to personal prestige and income. This competition for physician allegiance has a direct effect on utilization rates (doctors want spare capacity to suit their needs), on the range of services and facilities offered (doctors want more support), and on length of stay (doctors want longer stays). All of these increase the hospital's costs. The second strategy is to enter into contracts with third-party payers who will direct their clients to specific or preferred hospitals. The negative effect is that in competitive markets such payers may be able to bargain prices down. However, hospital differentiation makes it difficult for payers to make complete substitutions among them. As well, since the payers compete for clients, they often use hospital alliances as a selling point and therefore are often cooperative rather than confrontational in their negotiations. One tactic used by hospitals is to stress quality of service. But since quality in health care is hard to measure, patients are often unable to make direct assessments of alternatives. Hospitals therefore often 'signal' quality in various ways which may, and often do, increase hospital costs. (Some of these signals also attract physicians). Price is not a major element in competition. Most other strategies and tactics raise hospital costs and therefore price. Pressure from payers is turned back through differentiation (preventing substitution) and hospital-payer alliances for clients. Health care comes in too many packages to allow effective price competition. A final tactic is to increase the range of services or facilities offered. Enhanced services attract doctors by offering more support; attract some patients direct; and help to recapture market share lost to specialized clinics.(ABSTRACT TRUNCATED AT 400 WORDS)

The dynamics of technological change in medicine

This paper contrasts a dynamic and interactive view of technological change with the linear model of medical innovation that is still so deeply ingrained in many policy discussions. In particular, it focuses on the role of feedback mechanisms between the users and the developers of medical technology and the demand and supply forces (including competition among medical specialties) determining this feedback. It explores three distinct mechanisms by which technological change may contribute to rising health care spending: intensity of use of existing technology, introduction of new technologies, and expanded application of these new technologies.

The association between on-site cardiac catheterization facilities and the use of coronary angiography after acute myocardial infarction. Myocardial Infarction Triage and Intervention Project Investigators

BACKGROUND

During the past decade the use of coronary angiography after acute myocardial infarction has substantially increased. Among the possible contributing factors, the increasing availability of cardiac catheterization facilities was the focus of our investigation.

METHODS

We investigated whether the availability of cardiac catheterization facilities at an admitting hospital was associated with the likelihood that a patient would undergo coronary angiography. After adjusting for age, sex, cardiac history, and cardiac complications during hospitalization, we evaluated this association in 5867 consecutive patients with acute myocardial infarction admitted to 19 Seattle-area hospitals. We also assessed the association between the presence of on-site cardiac catheterization facilities and in-hospital mortality.

RESULTS

Patients admitted to hospitals with on-site cardiac catheterization facilities were far more likely to undergo coronary angiography (odds ratio, 3.21; 95 percent confidence interval, 2.81 to 3.67) than patients admitted to hospitals where transfer to another institution would be required to perform cardiac catheterization. Admission to a hospital with on-site facilities was more strongly associated with the use of coronary angiography than any characteristic of the patient. Although our study had limited power to detect differences in mortality, the availability of coronary angiography had no discernible association with in-hospital mortality rates (odds ratio for mortality among patients admitted to hospitals with on-site facilities vs. patients admitted to hospitals without such facilities, 0.88; 95 percent confidence interval, 0.71 to 1.09).

CONCLUSIONS

In this community-wide study, the availability of on-site cardiac catheterization facilities was associated with a higher likelihood that a patient would undergo coronary angiography. However, admission to hospitals with these facilities did not appear to be associated with lower short-term mortality.

Service patterns in local hospital markets: complementarity or medical arms race?

In this paper we investigate how the availability of selected services in individual hospitals is influenced by the number of neighbors who are potential or actual competitors. Hospitals offer a wide range of services, and some services may display a complementary pattern while others may contribute to a competitive medical arms race. We will examine the types of services that show these opposite patterns to analyze the dynamics that have characterized local hospital service decisions.

Keeping up with the Joneses: the influence of public and proprietary neighbours on voluntary hospitals

Individual hospitals often share their markets with other nearby hospitals. In this paper we examine how a hospital's ownership and the ownership of its hospital neighbours influence the availability of selected services. The presence of a CT scanner and a newborn nursery were found to be associated with both hospital ownership (voluntary, proprietary, or public) and with the ownership of hospital neighbours. Voluntary hospitals with a proprietary neighbour were more likely to have a CT scanner. These findings suggest that the ownership configuration of local hospital markets is an important influence on patterns of service availability.