Returns to Local-Area Healthcare Spending: Evidence from Health Shocks to Patients Far From Home

Long-term returns to local health-care spending

This paper investigates the effects of health-care spending on mortality rates of patients who experienced a heart attack. We relate in-hospital deaths to in-hospital spending and post-discharge deaths to post-discharge health-care spending. In our analysis, we use detailed administrative data on individual personal characteristics including comorbidities, information about the type of medical treatment and information about health-care expenses at the regional level. To account for potential selectivity in the region of health-care treatment we compare local patients with visitors and stayers with recent movers from a different region. We find that in regions with higher health-care spending mortality after heart attacks is substantially lower. From this we conclude that there are long-term returns to local health-care spending.

The unexpected costs of expertise: evidence from highly specialized physicians

High U.S. spending on health care is commonly attributed to its intensity of specialized, high-tech medical care. A growing body of research focuses on physicians whose medical decisions shape treatment intensity, costs, and patient outcomes. Often overlooked in this research is the assignment of physician skills to patient conditions, which may strongly affect health outcomes and productivity. This matching may be especially important in the case of hospital admissions as high-frequency fluctuations in patient flow make it challenging to maintain effective matches between the best-suited physicians and their patients. This paper focuses on hospitals' responses to demand shocks induced by unscheduled high-risk admissions. I show that these demand shocks result in physician-patient mismatches when hospitals are congested. Specifically, highly specialized physicians who are brought in to treat unscheduled high-risk admissions also treat previously admitted lower-risk patients. This leads to increased treatment intensity for lower-risk patients, which I attribute to persistence in physician practice style. Despite the greater treatment intensity, I find no detectable improvement in health outcomes, which prima facie could be viewed as waste. However, this paper demonstrates that such mismatches mostly happen when the cost of maintaining preferred physician-patient matching is high, which reflects hospitals' conscientious assessment of costs and benefits and should not be simply interpreted as inefficiency. These findings provide vital information for policy-makers looking to identify waste in utilization and create incentives to enhance efficiency in the health care sector.

Does waiting times decrease or increase operational costs in short and long-term? Evidence from Portuguese public hospitals

The Portuguese National Health System is composed of all public entities offering health services. There has been a successive increase in expenditure in recent years due to various factors that have contributed to a high degree of uncertainty about the evolution of operating costs in Public Business Hospitals. This research's main objective is to study the relationship between operational costs and waiting times as well as costs with healthcare professionals and waiting times in both external consultations and hospital surgeries. Furthermore, we will empirically assess the presence of U-shaped behaviour in both of these two relationships. We have included a sample of 38 hospitals considered in the Portuguese National Health System. We also included, in our analysis, five groups of public business hospitals, according to the Administrative Central Agency of Portugal's Health Service, considering the period between January 2015 and December 2019. To validate the two relationships proposed, the Autoregressive Distributed Lag panel model was used. This study highlights that longer waiting times for external consultation and surgery significantly affect hospital costs and suggest that longer waiting times do not merely increase absence rates. The study also proves that there are long-term effects that last beyond the short-term waiting period.

Place-Based Drivers of Mortality: Evidence from Migration

We estimate the effect of current location on elderly mortality by analyzing outcomes of movers in the Medicare population. We control for movers' origin locations as well as a rich vector of pre-move health measures. We also develop a novel strategy to adjust for remaining unobservables, using the correlation of residual mortality with movers' origins to gauge the importance of omitted variables. We estimate substantial effects of current location. Moving from a 10th to a 90th percentile location would increase life expectancy at age 65 by 1.1 years, and equalizing location effects would reduce cross-sectional variation in life expectancy by 15 percent. Places with favorable life expectancy effects tend to have higher quality and quantity of health care, less extreme climates, lower crime rates, and higher socioeconomic status.

Rumor has it: How do patients respond to patient-generated physician ratings?

This paper studies the impact of patient-generated ratings of primary care physicians in Norway. Norway has a universal health care system, with no available objective quality indicators. In May 2012, an online review platform that allows patients to rate their physician was launched. Relying on a difference-in-differences approach we show that higher-rated physicians see an increase in demand relative to lower-rated physicians. The effect is primarily driven by females and patients with high socioeconomic status. We find no indications that physicians change their practice style or supply of patient capacity in response to the ratings.

Gender differences in health insurance coverage in China

BACKGROUND

China initiated a reform of the health insurance system in the late 1990s. The new insurance, Urban Employee Basic Medical Insurance (UEBMI), is employment-based, which makes it more difficult than it used to be for those unemployed or informal employed (most of whom are women) to be covered by health insurance.

METHODS

Based on three large sample of micro datasets, we first use statistical methods to identify gender differences in health insurance. Next, we construct a logistic regression model to capture the differences in insurance coverage across age groups using the parameter of interaction terms for gender and age groups.

RESULTS

Based on data from a demographic survey that covers a large sample, we find that in the below 50 (in 2005) or 60 (in 2015) years age group, the coverage gap of UEBMI between men and women was relatively smaller, while a larger disparity existed in the above 50 (in 2005) or 60 (in 2015) group. Moreover, gender differences in health insurance were more significant in the low-education group, while no gender differences were found in the high-education group.

CONCLUSIONS

This paper explains the gender gap in health insurance and the reason for the wider gap among older people. Our study indicates that because the UEBMI in China mainly covers people with formal jobs, a lower labor participation rate (even much lower in formal jobs) of women has led to their greater difficulty in obtaining health insurance. Since the older women's greater difficulty in obtaining jobs or susceptibility to lay-offs during the period of the UEBMI's implementation, the possibility of being covered was even much lower. In fact, it was because of the combined effects of the UEBMI system and the labor market condition at that time that older women had a lower proportion of being covered under the UEBMI.

Does When You Die Depend on Where You Live? Evidence from Hurricane Katrina

We follow Medicare cohorts to estimate Hurricane Katrina's long-run mortality effects on victims initially living in New Orleans. Including the initial shock, the hurricane improved eight-year survival by 2.07 percentage points. Migration to lower-mortality regions explains most of this survival increase. Those migrating to low-versus high-mortality regions look similar at baseline, but their subsequent mortality is 0.83-1.01 percentage points lower per percentage point reduction in local mortality, quantifying causal effects of place on mortality among this population. Migrants' mortality is also lower in destinations with healthier behaviors and higher incomes but is unrelated to local medical spending and quality.

Association of Geographic Differences in Prevalence of Uncontrolled Chronic Conditions With Changes in Individuals' Likelihood of Uncontrolled Chronic Conditions

IMPORTANCE

The prevalence of leading risk factors for morbidity and mortality in the US significantly varies across regions, states, and neighborhoods, but the extent these differences are associated with a person's place of residence vs the characteristics of the people who live in different places remains unclear.

OBJECTIVE

To estimate the degree to which geographic differences in leading risk factors are associated with a person's place of residence by comparing trends in health outcomes among individuals who moved to different areas or did not move.

DESIGN, SETTING, AND PARTICIPANTS

This retrospective cohort study estimated the association between the differences in the prevalence of uncontrolled chronic conditions across movers' destination and origin zip codes and changes in individuals' likelihood of uncontrolled chronic conditions after moving, adjusting for person-specific fixed effects, the duration of time since the move, and secular trends among movers and those who did not move. Electronic health records from the Veterans Health Administration were analyzed. The primary analysis included 5 342 207 individuals with at least 1 Veterans Health Administration outpatient encounter between 2008 and 2018 who moved zip codes exactly once or never moved.

EXPOSURES

The difference in the prevalence of uncontrolled chronic conditions between a person's origin zip code and destination zip code (excluding the individual mover's outcomes).

MAIN OUTCOMES AND MEASURES

Prevalence of uncontrolled blood pressure (systolic blood pressure level >140 mm Hg or diastolic blood pressure level >90 mm Hg), uncontrolled diabetes (hemoglobin A1c level >8%), obesity (body mass index >30), and depressive symptoms (2-item Patient Health Questionnaire score ≥2) per quarter-year during the 3 years before and the 3 years after individuals moved.

RESULTS

The study population included 5 342 207 individuals (mean age, 57.6 [SD, 17.4] years, 93.9% men, 72.5% White individuals, and 12.7% Black individuals), of whom 1 095 608 moved exactly once and 4 246 599 never moved during the study period. Among the movers, the change after moving in the prevalence of uncontrolled blood pressure was 27.5% (95% CI, 23.8%-31.3%) of the between-area difference in the prevalence of uncontrolled blood pressure. Similarly, the change after moving in the prevalence of uncontrolled diabetes was 5.0% (95% CI, 2.7%-7.2%) of the between-area difference in the prevalence of uncontrolled diabetes; the change after moving in the prevalence of obesity was 3.1% (95% CI, 2.0%-4.2%) of the between-area difference in the prevalence of obesity; and the change after moving in the prevalence of depressive symptoms was 15.2% (95% CI, 13.1%-17.2%) of the between-area difference in the prevalence of depressive symptoms.

CONCLUSIONS AND RELEVANCE

In this retrospective cohort study of individuals receiving care at Veterans Health Administration facilities, geographic differences in prevalence were associated with a substantial percentage of the change in individuals' likelihood of poor blood pressure control or depressive symptoms, and a smaller percentage of the change in individuals' likelihood of poor diabetes control and obesity. Further research is needed to understand the source of these associations with a person's place of residence.

Regional variation in health care utilization and mortality

Geographic variation in health care utilization has raised concerns of possible inefficiencies in health care supply, as differences are often not reflected in health outcomes. Using comprehensive Norwegian microdata, we exploit cross-region migration to analyze regional variation in health care utilization. Our results indicate that place factors account for half of the difference in utilization between high and low utilization regions, while the rest reflects patient demand. We further document heterogeneous impacts of place across socioeconomic groups. Place factors account for 75% of the regional utilization difference for high school dropouts, and 40% for high school graduates; for patients with a college degree, the impact of place is negligible. We find no statistically significant association between the estimated place effects and overall mortality. However, we document a negative association between place effects and utilization-intensive causes of death such as cancer, suggesting high-supply regions may achieve modestly improved health outcomes.

Primary care physician practice styles and patient care: Evidence from physician exits in Medicare

Primary care physicians (PCPs) provide frontline health care to patients in the U.S.; however, it is unclear how their practice styles affect patient care. In this paper, we estimate the long-lasting effects of PCP practice styles on patient health care utilization by focusing on Medicare patients affected by PCP relocations or retirements, which we refer to as "exits." Observing where patients receive care after these exits, we estimate event studies to compare patients who switch to PCPs with different practice style intensities. We find that PCPs have large effects on a range of aggregate utilization measures, including physician and outpatient spending and the number of diagnosed conditions. Moreover, we find that PCPs have large effects on the quality of care that patients receive, and that all of these effects persist for several years. Our results suggest that switching to higher-quality PCPs could significantly affect patients' longer-run health outcomes.

IDENTIFYING SOURCES OF INEFFICIENCY IN HEALTHCARE

In medicine, the reasons for variation in treatment rates across hospitals serving similar patients are not well understood. Some interpret this variation as unwarranted, and push standardization of care as a way of reducing allocative inefficiency. An alternative interpretation is that hospitals with greater expertise in a treatment use it more because of their comparative advantage, suggesting that standardization is misguided. A simple economic model provides an empirical framework to separate these explanations. Estimating this model with data for heart attack patients, we find evidence of substantial variation across hospitals in both allocative inefficiency and comparative advantage, with most hospitals overusing treatment in part because of incorrect beliefs about their comparative advantage. A stylized welfare-calculation suggests that eliminating allocative inefficiency would increase the total benefits from the treatment that we study by 44%.

Associations between utilization rates and patients' health: a study of spine surgery and patient-reported outcomes (EQ-5D and ODI)

Background

A vast body of literature has documented regional variations in healthcare utilization rates. The extent to which such variations are “unwarranted” critically depends on whether there are corresponding variations in patients’ needs. Using a unique medical registry, the current paper investigated any associations between utilization rates and patients’ needs, as measured by two patient-reported outcome measures (PROMs).

Methods

This observational panel study merged patient-level data from the Norwegian Patient Registry (NPR), Statistics Norway, and the Norwegian Registry for Spine Surgery (NORspine) for individuals who received surgery for degenerative lumbar spine disorders in 2010–2015. NPR consists of hospital administration data. NORspine includes two PROMs: the generic health-related quality of life instrument EQ-5D and the disease-specific, health-related quality of life instrument Oswestry Disability Index (ODI). Measurements were assessed at baseline and at 3 and 12 months post-surgery and included a wide range of patient characteristics. Our case sample included 15,810 individuals. We analyzed all data using generalized estimating equations.

Results

Our results show that as treatment rates increase, patients have better health at baseline. Furthermore, increased treatment rates are associated with smaller health gain.

Conclusion

The correlation between treatment rates and patients health indicate the presence of unwarranted variation in treatment rates for lumbar spine disorders.

Patient Outcomes After Hospital Discharge to Home With Home Health Care vs to a Skilled Nursing Facility

IMPORTANCE

Use of postacute care is common and costly in the United States, but there is significant uncertainty about whether the choice of postacute care setting matters. Understanding these tradeoffs is particularly important as new alternative payment models push patients toward lower-cost settings for care.

OBJECTIVE

To investigate the association of patient outcomes and Medicare costs of discharge to home with home health care vs discharge to a skilled nursing facility.

DESIGN, SETTING, AND PARTICIPANTS

A retrospective cohort study used Medicare claims data from short-term acute-care hospitals in the United States and skilled nursing facility and home health assessment data from January 1, 2010, to December 31, 2016, on Medicare beneficiaries who were discharged from the hospital to home with home health care or to a skilled nursing facility. To address the endogeneity of treatment choice, an instrumental variables approach used the differential distance between the beneficiary's home zip code and the closest home health agency and the closest skilled nursing facility as an instrument.

EXPOSURES

Receipt of postacute care at home vs in a skilled nursing facility.

MAIN OUTCOMES AND MEASURES

Readmission within 30 days of hospital discharge, death within 30 days of hospital discharge, improvement in functional status during the postacute care episode, and Medicare payment for postacute care and total payment for the 60-day episode.

RESULTS

A total of 17 235 854 hospitalizations (62.2% women and 37.8% men; mean [SD] age, 80.5 [7.9] years) were discharged either to home with home health care (38.8%) or to a skilled nursing facility (61.2%) during the study period. Discharge to home was associated with a 5.6-percentage point higher rate of readmission at 30 days compared with discharge to a skilled nursing facility (95% CI, 0.8-10.3; P = .02). There were no significant differences in 30-day mortality rates (-2.0 percentage points; 95% CI, 0.8-10.3; P = .12) or improved functional status (-1.9 percentage points; 95% CI, -12.0 to 8.2; P = .71). Medicare payment for postacute care was significantly lower for those discharged to home compared with those discharged to a skilled nursing facility (-$5384; 95% CI, -$6932 to -$3837; P < .001), as was total Medicare payment within the first 60 days after admission (-$4514; 95% CI, -$6932 to -$3837; P < .001).

CONCLUSIONS AND RELEVANCE

Among Medicare beneficiaries eligible for postacute care at home or in a skilled nursing facility, discharge to home with home health care was associated with higher rates of readmission, no detectable differences in mortality or functional outcomes, and lower Medicare payments.

Geographic variation in the delivery of high-value inpatient care

OBJECTIVES

To measure value in the delivery of inpatient care and to quantify its variation across U.S. regions.

DATA SOURCES / STUDY SETTING

A random (20%) sample of 33,713 elderly fee-for-service Medicare beneficiaries treated in 2,232 hospitals for a heart attack in 2013.

STUDY DESIGN

We estimate a production function for inpatient care, defining output as stays with favorable patient outcomes in terms of survival and readmission. The regression model includes hospital inputs measured by treatment costs, as well as patient characteristics. Region-level effects in the production function are used to estimate the productivity and value of the care delivered by hospitals within regions.

DATA COLLECTION / EXTRACTION METHODS

Medicare claims and enrollment files, linked to the Dartmouth Atlas of Health Care and Inpatient Prospective Payment System Impact Files.

PRINCIPAL FINDINGS

Hospitals in the hospital referral region at the 90th percentile of the value distribution delivered 54% more high-quality stays than hospitals at the 10th percentile could have delivered, after adjusting for treatment costs and patient severity.

CONCLUSIONS

Variation in the delivery of high-value inpatient care points to opportunities for better quality and lower costs.

Physician Beliefs and Patient Preferences: A New Look at Regional Variation in Health Care Spendingf

There is considerable controversy about the causes of regional variations in health care expenditures. Using vignettes from patient and physician surveys linked to fee-for-service Medicare expenditures, this study asks whether patient demand-side factors or physician supply-side factors explain these variations. The results indicate that patient demand is relatively unimportant in explaining variations. Physician organizational factors matter, but the most important factor is physician beliefs about treatment. In Medicare, we estimate that 35 percent of spending for end-of-life care and 12 percent of spending for heart attack patients (and for all enrollees) is associated with physician beliefs unsupported by clinical evidence. (JEL D83, H75, I11, I18).

Economic development and health outcomes: Evidence from cardiovascular disease mortality in Europe

The impact of economic growth on health outcomes has generated various conflicting results in recent years, particularly with the emergence of cardiovascular disease as one of the most salient global health issues. This paper looks at the relationship between economic development and health outcomes. We first estimate an empirical model using data on annual cardiovascular disease mortality in a panel of 27 European countries, over the period 2003 to 2014, together with per capita GDP levels in each country. We also include a number of additional determinants of health outcomes as prescribed by the literature, including various socio-economic, lifestyle and contextual variables. The results show that there is a statistically-significant inverted U-shaped relationship, whereby as income increases mortality rates first rise, before declining at subsequent levels of development. This trajectory persists even after the inclusion of the other determinants of health, as well as other robustness checks. We then seek to explain the persistence of the inverted U-shaped income-mortality relationship using a microeconomic model of consumer choice, with our findings suggesting that this relationship is consistent with a scenario of increasing returns to scale from healthcare investment. The results emphasise the importance of investment in the latest healthcare technologies and continued improvements to public healthcare systems, particularly within developing countries, in conjunction with efforts to boost economic growth.

Medical Care Spending and Labor Market Outcomes: Evidence from Workers' Compensation Reforms

Medical care represents an important component of workers' compensation benefits with the potential to improve health and post-injury labor outcomes, but little is known about the relationship between medical care spending and the labor outcomes of injured workers. We exploit the 2003--2004 California workers' compensation reforms which reduced medical spending disproportionately for workers incurring low back injuries. We link administrative claims data to earnings records for injured workers and their uninjured coworkers. We find that workers with low back injuries experienced a 7.6 percent post-reform decline in medical care, and an 8.1 percent drop in post-injury earnings relative to other injured workers.

The Impact of Dementia Special Care Units on Quality of Care: An Instrumental Variables Analysis

OBJECTIVE

To compare the quality of care following admission to a nursing home (NH) with and without a dementia special care unit (SCU) for residents with dementia.

DATA SOURCES/STUDY SETTING

National resident-level minimum dataset assessments (MDS) 2005-2010 merged with Medicare claims and provider-level data from the Online Survey, Certification, and Reporting database.

STUDY DESIGN

We employ an instrumental variable approach to address the endogeneity of selection into an SCU facility controlling for a range of individual-level covariates. We use "differential distance" to a nursing home with and without an SCU as our instrument.

DATA COLLECTION/EXTRACTION METHODS

Minimum dataset assessments performed at NH admission and every quarter thereafter.

PRINCIPAL FINDINGS

Admission to a facility with an SCU led to a reduction in inappropriate antipsychotics (-9.7 percent), physical restraints (-9.6 percent), pressure ulcers (-3.3 percent), feeding tubes (-8.3 percent), and hospitalizations (-14.7 percent). We found no impact on the use of indwelling urinary catheters. Results held in sensitivity analyses that accounted for the share of SCU beds and the facilities' overall quality.

CONCLUSIONS

Facilities with an SCU provide better quality of care as measured by several validated quality indicators. Given the aging population, policies to promote the expansion and use of dementia SCUs may be warranted.

30-Day Episode Payments and Heart Failure Outcomes Among Medicare Beneficiaries

OBJECTIVES

The purpose of this study was to examine the association of 30-day payments for an episode of heart failure (HF) care at the hospital level with patient outcomes.

BACKGROUND

There is increased focus among policymakers on improving value for HF care, given its rising prevalence and associated financial burden in the United States; however, little is known about the relationship between payments and mortality for a 30-day episode of HF care.

METHODS

Using Medicare claims data for all fee-for-service beneficiaries hospitalized for HF between July 1, 2011, and June 30, 2014, we examined the association between 30-day Medicare payments at the hospital level (beginning with a hospital admission for HF and across multiple settings following discharge) and patient 30-day mortality using mixed-effect logistic regression models.

RESULTS

We included 1,343,792 patients hospitalized for HF across 2,948 hospitals. Mean hospital-level 30-day Medicare payments per beneficiary were $15,423 ± $1,523. Overall observed mortality in the cohort was 11.3%. Higher hospital-level 30-day payments were associated with lower patient mortality after adjustment for patient characteristics (odds ratio per $1,000 increase in payments: 0.961; 95% confidence interval [CI]: 0.954 to 0.967). This relationship was slightly attenuated after accounting for hospital characteristics and HF volume, but remained significant (odds ratio per $1,000 increase: 0.968; 95% CI: 0.962 to 0.975). Additional adjustment for potential mediating factors, including cardiac service capability and post-acute service use, did not significantly affect the relationship.

CONCLUSIONS

Higher hospital-level 30-day episode payments were associated with lower patient mortality following a hospitalization for HF. This has implications for policies that incentivize reduction in payments without considering value. Further investigation is needed to understand the mechanisms that underlie this relationship.

Association Between 30-Day Episode Payments and Acute Myocardial Infarction Outcomes Among Medicare Beneficiaries

BACKGROUND

Recent policy efforts have focused on improving the value of acute myocardial infarction (AMI) care. Medicare payment programs, for example, increasingly evaluate hospital performance based on spending, as determined by payments made to institutions and providers, and outcome measures for a longitudinal episode of AMI care. Little is known about the relationship between total 30-day payments-both in the inpatient and immediate postdischarge timeframe-and outcomes after an admission for AMI.

METHODS AND RESULTS

Using Medicare claims data, we identified Medicare fee-for-service beneficiaries ≥65 years of age who were hospitalized at an acute-care hospital for AMI between July 1, 2011, and June 30, 2014, and examined the association between hospital-level 30-day payments for an episode of AMI care and patient 30-day mortality using mixed regression models with a logit link function and random hospital intercepts. Our cohort included 642 105 index hospitalizations for AMI at 2319 acute-care hospitals. Overall mean 30-day episode payments per beneficiary were $22 128 (SD, $1750). The observed 30-day mortality rate was 12.9%. Higher 30-day payments were associated with lower 30-day mortality after adjustment for patient characteristics and comorbidities (adjusted odds ratio for additional $1000 payments, 0.986; 95% confidence interval, 0.979-0.992; P<0.001). Additional adjustment for potential mediating factors, including hospital characteristics, coronary revascularization rates, and discharge disposition, did not significantly attenuate the relationship (adjusted odds ratio for additional $1000 payments, 0.987; 95% confidence interval, 0.980-0.994; P<0.001).

CONCLUSIONS

Higher hospital-level 30-day payments-both inpatient and in multiple settings after discharge-for AMI care were associated with lower 30-day mortality among beneficiaries. This may have implications for payment programs that incent reduction in payments without considering value.

In the Shadow of a Giant: Medicare's Influence on Private Physician Payments

We analyze Medicare's influence on private insurers' payments for physicians' services. Using a large administrative change in reimbursements for surgical versus medical care, we find that private prices follow Medicare's lead. A $1.00 increase in Medicare's fees increases corresponding private prices by $1.16. A second set of Medicare fee changes, which generates area-specific payment shocks, has a similar effect on private reimbursements. Medicare's influence is strongest in areas with concentrated insurers and competitive physician markets, consistent with insurer-doctor bargaining. By echoing Medicare's pricing changes, these payment spillovers amplify Medicare's impact on specialty choice and other welfare-relevant aspects of physician practices.

The effect of economic development on population health: a review of the empirical evidence

BACKGROUND

Economic growth is considered an important determinant of population health.

SOURCES OF DATA

Relevant studies investigating the effect of economic growth on health outcomes were identified from Google Scholar and PubMed searches in economics and medical journals.

AREAS OF AGREEMENT

Additional resources generated through economic growth are potentially useful for improving population health.

AREAS OF CONTROVERSY

The empirical evidence on the aggregate effect of economic growth on population health is rather mixed and inconclusive.

GROWING POINTS

The causal pathways from economic growth to population health are crucial and failure or success in completing the pathways explains differences in empirical findings.

AREAS TIMELY FOR DEVELOPING RESEARCH

Future research should investigate how additional resources can more effectively reach those in need and how additional resources can be used more efficiently. It is particularly relevant to understand why preventive health care in developing countries is very price elastic whereas curative health care is very health inelastic and how this understanding can inform public health policy.

Do hospital-owned skilled nursing facilities provide better post-acute care quality?

As hospitals are increasingly held accountable for patients' post-discharge outcomes under new payment models, hospitals may choose to acquire skilled nursing facilities (SNFs) to better manage these outcomes. This raises the question of whether patients discharged to hospital-based SNFs have better outcomes. In unadjusted comparisons, hospital-based SNF patients have much lower Medicare utilization in the 180 days following discharge relative to freestanding SNF patients. We solved the problem of differential selection into hospital-based and freestanding SNFs by using differential distance from home to the nearest hospital with a SNF relative to the distance from home to the nearest hospital without a SNF as an instrument. We found that hospital-based SNF patients spent roughly 5 more days in the community and 6 fewer days in the SNF in the 180 days following their original hospital discharge with no significant effect on mortality or hospital readmission.

Medicaid Insurance in Old Age

The old age provisions of the Medicaid program were designed to insure retirees against medical expenses. We estimate a structural model of savings and medical spending and use it to compute the distribution of lifetime Medicaid transfers and Medicaid valuations across currently single retirees. Compensating variation calculations indicate that current retirees value Medicaid insurance at more than its actuarial cost, but that most would value an expansion of the current Medicaid program at less than its cost. These findings suggest that for current single retirees, the Medicaid program may be of the approximately right size.

The Association Between Income and Life Expectancy in the United States, 2001-2014

IMPORTANCE

The relationship between income and life expectancy is well established but remains poorly understood.

OBJECTIVES

To measure the level, time trend, and geographic variability in the association between income and life expectancy and to identify factors related to small area variation.

DESIGN AND SETTING

Income data for the US population were obtained from 1.4 billion deidentified tax records between 1999 and 2014. Mortality data were obtained from Social Security Administration death records. These data were used to estimate race- and ethnicity-adjusted life expectancy at 40 years of age by household income percentile, sex, and geographic area, and to evaluate factors associated with differences in life expectancy.

EXPOSURE

Pretax household earnings as a measure of income.

MAIN OUTCOMES AND MEASURES

Relationship between income and life expectancy; trends in life expectancy by income group; geographic variation in life expectancy levels and trends by income group; and factors associated with differences in life expectancy across areas.

RESULTS

The sample consisted of 1,408,287,218 person-year observations for individuals aged 40 to 76 years (mean age, 53.0 years; median household earnings among working individuals, $61,175 per year). There were 4,114,380 deaths among men (mortality rate, 596.3 per 100,000) and 2,694,808 deaths among women (mortality rate, 375.1 per 100,000). The analysis yielded 4 results. First, higher income was associated with greater longevity throughout the income distribution. The gap in life expectancy between the richest 1% and poorest 1% of individuals was 14.6 years (95% CI, 14.4 to 14.8 years) for men and 10.1 years (95% CI, 9.9 to 10.3 years) for women. Second, inequality in life expectancy increased over time. Between 2001 and 2014, life expectancy increased by 2.34 years for men and 2.91 years for women in the top 5% of the income distribution, but by only 0.32 years for men and 0.04 years for women in the bottom 5% (P < .001 for the differences for both sexes). Third, life expectancy for low-income individuals varied substantially across local areas. In the bottom income quartile, life expectancy differed by approximately 4.5 years between areas with the highest and lowest longevity. Changes in life expectancy between 2001 and 2014 ranged from gains of more than 4 years to losses of more than 2 years across areas. Fourth, geographic differences in life expectancy for individuals in the lowest income quartile were significantly correlated with health behaviors such as smoking (r = -0.69, P < .001), but were not significantly correlated with access to medical care, physical environmental factors, income inequality, or labor market conditions. Life expectancy for low-income individuals was positively correlated with the local area fraction of immigrants (r = 0.72, P < .001), fraction of college graduates (r = 0.42, P < .001), and government expenditures (r = 0.57, P < .001).

CONCLUSIONS AND RELEVANCE

In the United States between 2001 and 2014, higher income was associated with greater longevity, and differences in life expectancy across income groups increased over time. However, the association between life expectancy and income varied substantially across areas; differences in longevity across income groups decreased in some areas and increased in others. The differences in life expectancy were correlated with health behaviors and local area characteristics.

The impact of agglomeration economies on hospital input prices

This paper examines the extent to which agglomeration of the hospital service industry enhances the productivity of producing health care. Specifically, we use a large set of private insurance claims from the FAIR Health database to show that an increasing spatial concentration of hospital services results in a decreased cost of obtaining intermediate medical services. We explicitly test whether the reduced cost at concentrated locations arises from the ability to share intermediate service providers. The identification relies on state variation in medical lab technician licensure requirements, which influence the cost of intermediate services only through the cost of running a lab. Our findings suggest that agglomeration of the hospital service industry attracts specialized medical labs, which in turn help to reduce the cost of producing laboratory tests.

Technology Diffusion and Productivity Growth in Health Care

We draw on macroeconomic models of diffusion and productivity to explain empirical patterns of survival gains in heart attacks. Using Medicare data for 2.8 million patients during 1986-2004, we find that hospitals rapidly adopting cost-effective innovations such as beta blockers, aspirin, and reperfusion, had substantially better outcomes for their patients. Holding technology adoption constant, the marginal returns to spending were relatively modest. Hospitals increasing the pace of technology diffusion ("tigers") experienced triple the survival gains compared to those with diminished rates ("tortoises"). In sum, small differences in the propensity to adopt effective technology lead to wide productivity differences across hospitals.

Returns to Treatment in the Formal Health Care Sector: Evidence from Tanzania

Improving access to the formal health care sector is a primary public health goal in many low-income countries. But the returns to this access are unclear, given that the quality of care at public health facilities is often considered inadequate. We exploit temporal and geographic variation in the cost of traveling to formal sector health facilities to show that treatment at these facilities improves short-term health outcomes for acutely ill children in Tanzania. Our results suggest that these improvements are driven in part by more timely receipt of and better adherence to antimalarial treatment.

US hospitals experienced substantial productivity growth during 2002-11

The need for better value in US health care is widely recognized. Existing evidence suggests that improvement in the productivity of American hospitals-that is, the output that hospitals produce from inputs such as labor and capital-has lagged behind that of other industries. However, previous studies have not adequately addressed quality of care or severity of patient illness. Our study, by contrast, adjusts for trends in the severity of patients' conditions and health outcomes. We studied productivity growth among US hospitals in treating Medicare patients with heart attack, heart failure, and pneumonia during 2002-11. We found that the rates of annual productivity growth were 0.78 percent for heart attack, 0.62 percent for heart failure, and 1.90 percent for pneumonia. However, unadjusted productivity growth appears to have been negative. These findings suggest that productivity growth in US health care could be better than is sometimes believed, and may help alleviate concerns about Medicare payment policy under the Affordable Care Act.

Measuring Returns to Hospital Care: Evidence from Ambulance Referral Patterns

Medicare spending exceeds 4% of GDP in the US each year, and there are concerns that moral hazard problems have led to overspending. This paper considers whether hospitals that treat patients more aggressively and receive higher payments from Medicare improve health outcomes for their patients. An innovation is a new lens to compare hospital performance for emergency patients: plausibly exogenous variation in ambulance-company assignment among patients who live near one another. Using Medicare data from 2002-2010, we show that ambulance company assignment importantly affects hospital choice for patients in the same ZIP code. Using data for New York State from 2000-2006 that matches exact patient addresses to hospital discharge records, we show that patients who live very near each other but on either side of ambulance service area boundaries go to different types of hospitals. Both identification strategies show that higher-cost hospitals achieve better patient outcomes for a variety of emergency conditions. Using our Medicare sample, the estimates imply that a one standard deviation increase in Medicare reimbursement leads to a 4 percentage point reduction in mortality (10% compared to the mean). Taking into account one-year spending after the health shock, the implied cost per at least one year of life saved is approximately $80,000. These results are found across different types of hospitals and patients, as well across both identification strategies.

Long-term impact of medicare payment reductions on patient outcomes

OBJECTIVE

To examine the long-term impact of Medicare payment reductions on patient outcomes for Medicare acute myocardial infarction (AMI) patients.

DATA SOURCES

Analysis of secondary data compiled from 100 percent Medicare Provider Analysis and Review between 1995 and 2005, Medicare hospital cost reports, Inpatient Prospective Payment System Payment Impact Files, American Hospital Association annual surveys, InterStudy, Area Resource Files, and County Business Patterns.

STUDY DESIGN

We used a natural experiment-the Balanced Budget Act (BBA) of 1997-as an instrument to predict cumulative Medicare revenue loss due solely to the BBA, and basing on the predicted loss categorized hospitals into small, moderate, or large payment-cut groups and followed Medicare AMI patient outcomes in these hospitals over an 11-year panel between 1995 and 2005.

PRINCIPAL FINDINGS

We found that while Medicare AMI mortality trends remained similar across hospitals between pre-BBA and initial-BBA periods, hospitals facing large payment cuts saw smaller improvement in mortality rates relative to that of hospitals facing small cuts in the post-BBA period. Part of the relatively higher AMI mortalities among large-cut hospitals might be related to reductions in staffing levels and operating costs, and a small part might be due to patient selection.

CONCLUSIONS

We found evidence that hospitals facing large Medicare payment cuts as a result of BBA of 1997 were associated with deteriorating patient outcomes in the long run. Medicare payment reductions may have an unintended consequence of widening the gap in quality across hospitals.

The association of unfavorable outcomes with the intensity of neurosurgical care in the United States

OBJECT

There is wide regional variability in the volume of procedures performed for similar surgical patients throughout the United States. We investigated the association of the intensity of neurosurgical care (defined as the average annual number of neurosurgical procedures per capita) with mortality, length of stay (LOS), and rate of unfavorable discharge for inpatients after neurosurgical procedures.

METHODS

We performed a retrospective cohort study involving the 202,518 patients who underwent cranial neurosurgical procedures from 2005-2010 and were registered in the National Inpatient Sample (NIS) database. Regression techniques were used to investigate the association of the average intensity of neurosurgical care with the average mortality, LOS, and rate of unfavorable discharge.

RESULTS

The inpatient neurosurgical mortality, rate of unfavorable discharge, and average LOS varied significantly among several states. In a multivariate analysis male gender, coverage by Medicaid, and minority racial status were associated with increased mortality, rate of unfavorable discharge, and LOS. The opposite was true for coverage by private insurance, higher income, fewer comorbidities and small hospital size. There was no correlation of the intensity of neurosurgical care with the mortality (Pearson's ρ = -0.18, P = 0.29), rate of unfavorable discharge (Pearson's ρ = 0.08, P = 0.62), and LOS of cranial neurosurgical procedures (Pearson's ρ = -0.21, P = 0.22).

CONCLUSIONS

We observed significant disparities in mortality, LOS, and rate of unfavorable discharge for cranial neurosurgical procedures in the United States. Increased intensity of neurosurgical care was not associated with improved outcomes.

Effect of nursing home ownership on hospitalization of long-stay residents: an instrumental variables approach

Hospitalizations among nursing home residents are frequent, expensive, and often associated with further deterioration of resident condition. The literature indicates that a substantial fraction of admissions is potentially preventable and that nonprofit nursing homes are less likely to hospitalize their residents. However, the correlation between ownership and hospitalization might reflect unobserved resident differences rather than a causal relationship. Using national minimum data set assessments linked with Medicare claims, we use a national cohort of long-stay residents who were newly admitted to nursing homes within an 18-month period spanning January 1, 2004 and June 30, 2005. After instrumenting for ownership status, we found that IV estimates of the effect of nonprofit ownership on hospitalization are at least as large as the non-instrumented effects, indicating that selection bias does not explain the observed relationship. We also found evidence suggesting the lower rate of hospitalizations among nonprofits was due to a different threshold for transfer.

What accounts for the regional differences in the utilisation of hospitals in Germany?

There are huge regional variations in the utilisation of hospital services in Germany. In 2007 and 2008 the states of Hamburg and Baden-Württemberg had on average just under 38 % fewer hospitalisations per capita than Saxony-Anhalt. We use data from the DRG statistics aggregated at the county level in combination with numerous other data sources (e.g. INKAR Database, accounting data from the National Association of Statutory Health Insurance Physicians (KBV), Federal Medical Registry, Germany Hospital Directory, population structure per county) to establish the proportion of the observed regional differences that can be explained at county and state levels. Overall we are able to account for 73 % of the variation at state level in terms of observable factors. By far the most important reason for the regional variation in the utilisation of in-patient services is differences in medical needs. Differences in the supply of medical services and the substitutability of outpatient and inpatient treatment are also relevant, but to a lesser extent.

The association between health care quality and cost: a systematic review

BACKGROUND

Although there is broad policy consensus that both cost containment and quality improvement are critical, the association between costs and quality is poorly understood.

PURPOSE

To systematically review evidence of the association between health care quality and cost.

DATA SOURCES

Electronic literature search of PubMed, EconLit, and EMBASE databases for U.S.-based studies published between 1990 and 2012.

STUDY SELECTION

Title, abstract, and full-text review to identify relevant studies.

DATA EXTRACTION

Two reviewers independently abstracted data with differences reconciled by consensus. Studies were categorized by level of analysis, type of quality measure, type of cost measure, and method of addressing confounders.

DATA SYNTHESIS

Of 61 included studies, 21 (34%) reported a positive or mixed-positive association (higher cost associated with higher quality); 18 (30%) reported a negative or mixed-negative association; and 22 (36%) reported no difference, an imprecise or indeterminate association, or a mixed association. The associations were of low to moderate clinical significance in many studies. Of 9 studies using instrumental variables analysis to address confounding by unobserved patient health status, 7 (78%) reported a positive association, but other characteristics of these studies may have affected their findings.

LIMITATIONS

Studies used widely heterogeneous methods and measures. The review is limited by the quality of underlying studies.

CONCLUSION

Evidence of the direction of association between health care cost and quality is inconsistent. Most studies have found that the association between cost and quality is small to moderate, regardless of whether the direction is positive or negative. Future studies should focus on what types of spending are most effective in improving quality and what types of spending represent waste.

PRIMARY FUNDING SOURCE

Robert Wood Johnson Foundation.

Effect of nursing home ownership on the quality of post-acute care: an instrumental variables approach

Given the preferential tax treatment afforded nonprofit firms, policymakers and researchers have been interested in whether the nonprofit sector provides higher nursing home quality relative to its for-profit counterpart. However, differential selection into for-profits and nonprofits can lead to biased estimates of the effect of ownership form. By using "differential distance" to the nearest nonprofit nursing home relative to the nearest for-profit nursing home, we mimic randomization of residents into more or less "exposure" to nonprofit homes when estimating the effects of ownership on quality of care. Using national Minimum Data Set assessments linked with Medicare claims, we use a national cohort of post-acute patients who were newly admitted to nursing homes within an 18-month period spanning January 1, 2004 and June 30, 2005. After instrumenting for ownership status, we found that post-acute patients in nonprofit facilities had fewer 30-day hospitalizations and greater improvement in mobility, pain, and functioning.

Comparing local and regional variation in health care spending

BACKGROUND

Wide geographic variation in health care spending has generated both concern about inefficiency and policy debate about geographic-based payment reform. Evidence regarding variation has focused on hospital referral regions (HRRs), which incorporate numerous local hospital service areas (HSAs). If there is substantial variation across local areas within HRRs, then policies focusing on HRRs may be poorly targeted.

METHODS

Using prescription drug and medical claims data from a 5% random sample of Medicare beneficiaries from 2006 through 2009, we compared variation in health care spending and utilization among 306 HRRs and 3436 HSAs. We adjusted for beneficiary-level demographic characteristics, insurance status, and clinical characteristics.

RESULTS

There was substantial local variation in health care (drug and nondrug) utilization and spending. Furthermore, many of the low-spending HSAs were located in high-spending HRRs, and many of the high-spending HSAs were in low-spending HRRs. For drug spending, only 50.7% of the HSAs located within the borders of the highest-spending quintile of HRRs were in the highest-spending quintile of HSAs; conversely, only 51.5% of the highest-spending HSAs were located within the borders of the highest-spending HRRs. Similar patterns were observed for nondrug spending.

CONCLUSIONS

The effectiveness of payment reforms in reducing overutilization while maintaining access to high-quality care depends on the effectiveness of targeting. Our analysis suggests that HRR-based policies may be too crudely targeted to promote the best use of health care resources. (Funded by the Institute of Medicine and others.).

Returns to Local-Area Healthcare Spending: Evidence from Health Shocks to Patients Far From Home

Healthcare spending varies widely across markets, and previous empirical studies find little evidence that higher spending translates into better health outcomes. The main innovation in this paper exploits this cross-sectional variation in hospital spending in a new way by considering patients who are exposed to healthcare systems not designed for them: patients far from home when a health emergency strikes. Visitors to Florida who become ill in high-spending areas have significantly lower mortality rates compared to visitors in lower-spending areas. The results are robust within groups of similar visitors and within groups of destinations that appear to be close demand substitutes-areas that likely attract similar visitors.

The effect of rising health care costs on U.S. tax rates

The fraction of GDP devoted to health care in the United States is the highest in the world and rising rapidly. Recent economic studies have highlighted the growing value of health improvements, but less attention has been paid to the efficiency costs of tax-financed spending to pay for such improvements. This paper uses a life cycle model of labor supply, saving, and longevity improvement to measure the balanced-budget impact of continued growth in the Medicare and Medicaid programs. The model predicts that top marginal tax rates could rise to 70 percent by 2060, depending on the progressivity of future tax changes. The deadweight loss of the tax system is greater when the financing is more progressive. If the share of taxes paid by high-income taxpayers remains the same, the efficiency cost of raising the revenue needed to finance the additional health spending is $1.48 per dollar of revenue collected, and GDP declines (relative to trend) by 11 percent. A proportional payroll tax has a lower efficiency cost (41 cents per dollar of revenue averaged over all tax hikes, a 5 percent drop in GDP) but more than doubles the share of the tax burden borne by lower income taxpayers. Empirical support for the model comes from analysis of OECD country data showing that countries facing higher tax burdens in 1979 experienced slower health care spending growth in subsequent decades. The rising burden imposed by the public financing of health care expenditures may therefore serve as a brake on health care spending growth.

Evidence on the efficacy of inpatient spending on Medicare patients

CONTEXT

It is widely believed that a significant amount, perhaps as much as 20 to 30 percent, of health care spending in the United States is wasted, despite market forces such as managed care organizations and large, self-insured firms with a financial incentive to eliminate waste of this magnitude.

METHODS

This article uses Medicare claims data to study the association between inpatient spending and the thirty-day mortality of Medicare patients admitted to hospitals between 2001 and 2005 for surgery (general, orthopedic, vascular) and medical conditions (acute myocardial infarction [AMI], congestive heart failure [CHF], stroke, and gastrointestinal bleeding).

FINDINGS

Estimates from the analysis indicated that except for AMI patients, a 10 percent increase in inpatient spending was associated with a decrease of between 3.1 and 11.3 percent in thirty-day mortality, depending on the type of patient.

CONCLUSIONS

Although some spending may be inefficient, the results suggest that the amount of waste is less than conventionally believed, at least for inpatient care.

Is survival better at hospitals with higher "end-of-life" treatment intensity?

BACKGROUND

Concern regarding wide variations in spending and intensive care unit use for patients at the end of life hinges on the assumption that such treatment offers little or no survival benefit.

OBJECTIVE

To explore the relationship between hospital "end-of-life" (EOL) treatment intensity and postadmission survival.

RESEARCH DESIGN

Retrospective cohort analysis of Pennsylvania Health Care Cost Containment Council discharge data April 2001 to March 2005 linked to vital statistics data through September 2005 using hospital-level correlation, admission-level marginal structural logistic regression, and pooled logistic regression to approximate a Cox survival model.

SUBJECTS

A total of 1,021,909 patients > or =65 years old, incurring 2,216,815 admissions in 169 Pennsylvania acute care hospitals.

MEASURES

EOL treatment intensity (a summed index of standardized intensive care unit and life-sustaining treatment use among patients with a high predicted probability of dying [PPD] at admission) and 30- and 180-day postadmission mortality.

RESULTS

There was a nonlinear negative relationship between hospital EOL treatment intensity and 30-day mortality among all admissions, although patients with higher PPD derived the greatest benefit. Compared with admission at an average intensity hospital, admission to a hospital 1 standard deviation below versus 1 standard deviation above average intensity resulted in an adjusted odds ratio of mortality for admissions at low PPD of 1.06 (1.04-1.08) versus 0.97 (0.96-0.99); average PPD: 1.06 (1.04-1.09) versus 0.97 (0.96-0.99); and high PPD: 1.09 (1.07-1.11) versus 0.97 (0.95-0.99), respectively. By 180 days, the benefits to intensity attenuated (low PPD: 1.03 [1.01-1.04] vs. 1.00 [0.98-1.01]; average PPD: 1.03 [1.02-1.05] vs. 1.00 [0.98-1.01]; and high PPD: 1.06 [1.04-1.09] vs. 1.00 [0.98-1.02]), respectively.

CONCLUSIONS

Admission to higher EOL treatment intensity hospitals is associated with small gains in postadmission survival. The marginal returns to intensity diminish for admission to hospitals above average EOL treatment intensity and wane with time.