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6210-08 July1994 TheHigh-CostHospitalMedicalStaff ProposalintheHealthSecurityAct: DistributionalImpacts W.PeteWelch MarkE.Miller 2T1h0e0UMrbSatnreeItn,stNit.uWt.e Washington.DC 20037 SupportforthisresearchwasprovidedbytheHealthCareFinancingAdministrationtoThe UrbanInstitutethroughCooperativeAgreementNo<l8^-9003^ ThisCooperauveAgreement supportedanumberofresearchprojectsrelatedtoinRbspitaiphysicianexpenditures. Thetotal budgetforalltheseprojectswasS646.002andrepresentsthesolesourceoffunding. TheauthorswouldliketoacknowledgeEllenEnglertforresearchassistanceandHarvey Meycrsonrurprogramming. .Anyopmionsexpressedarethoseoftheauthorsanddonot necessarilyreflecttheopinionsoftheHealthCareFinancing.Administration.TheUrbanInstimte. oritssponsors. 51 TABLEOFCONTENTS EXECUTIVESUMMARY i INTRODUCTION I. , ILTHEPROPOSALINTHEHEALTHSECURITYACT 2 in.METHODS 4 A.BehavioralAssumptions 4 B.DatabaseConstruction 5 IV.THEDISTRIBUTIONALIMPACT 6 A.Simulation 5 B,VolumeperAdmissionbyState 9 V.THEIMPACTOFAPROTOTYPETRANSITIONOPTION 1 VT.THEPOTENTULSHIFTINGOFMEDICAREADMISSIONS 14 A.Introduction [4 B.Results 15 C.Discussion 1 REFERENCES 19 AppendixA.DECOMPOSITIONOFPOLICYIMPACT 21 AppendixB.CONSTRUCTIONOFSHIFTING-ADMISSIONDATABASE 26 AppendixC.HOSPITAL-LEVELADJUSTMENTS 29 TABLES EXECUTIVESUMMARY TheProposal Tofinancehealthcarelefcrr..theClintonAdrainistrationsHealthSecurityAct(HSA) includesseveralMedicaresavingsproposals. Oneoftheseproposals(Sec.4114)wouldlimit paymentstophysiciansinhospitalswithhighvolumeofphysicianservicesperadmission (i.e.,high-costmedicalstaffs). Thehigh-costmedicalstaffproposalwouldmeasurethevolumeofphysicianservices intermsoftheRelativeValueUnits(RVUs)usedintheMedicaidFeeSchedule. Amedical staffscoUectiveperformancewouldbedefinedintermsof"volumeperadmission"~RVUs peradmissionadjustedforcasemix.teachingstatus,anddisproportionatesharestatus. Ina givenyear.Medicarespaymentstophysiciansonamedicalstaffcouldnotcollectively exceedalimitdefinedasacertainpercentageabovethenationalmedian. PhysiciansprovidingservicesinhospitalswouldbillMedicareastheydonow. In 1998.theHealthCareFinancingAdminisQ-ation(HCFA)would,however,withhold15 percentofthepaymentforanyphysicianservicedeliveredinahospitalthathadbeen designatedashavingahigh-costmedicalstaff. In 1999.HCFAwouldcomparetheservices actuallydeliveredbyamedicalstaffandthelimit. Forstaffsbelowthelimitin 1998,the entirewithholdwouldbereturned. Forotherstaffs,thehigherthevolumeperadmission,the lessofthewithholdwouldberemmed. Thispapersimulatestheimpactofthisproposalonmedicalstaffsbythetypeof hospitalandbystate. Datafrom 1991 and 1992areusedforthesimulation. DistributionalImpacts OfaUmedicalstaffs.22.8pcrccmwouldbedesignatedas"highcost"andwouldhave awithholdappliedtotheirpayments. UndertheconservadvcAssumptionthatphysicians wouldnotchangetheirbehaviorinresponsetotheseincentives,only3.2percentofallstaffs wouldreceivealloftheirwithholdback. Theremaining 19.6percentwouldreceivesomeor noneoftheirwithholdback. Totheextentthatphysicianspracticeamoreconservativestyle ofmedicine,theywouldreceivemoreoftheirwithholdback. Asagroup,medicalstaffs wouldlose5.5percentofMedicarepaymentsforinpatientphysicianservices. AspresentedinTable 1.thisimpactvariesbyhospitaltype. Thepercentagereduction inpaymentwouldbeaboveaverageformedicalstaffsinlargeurbanareasandclosetozero forstaffsinruralareas. ThepercentagereductionwouldbeweUaboveaverageformedical staffsofmajorteachinghospitalsandweUbelowaverageforstaffsofnonteachinghospitals. Medicalstaffsofhospitalsservingadisproportionateshareofthepoorwouldexperiencea slightlygreaterthanaveragepercentagereduction. Thereissubstantialgeographicvariationintheimpact. MiddleAdanticstaffsfacea substantiallygreaterpercentagereducuoninpaymentthanstaffselsewhere. Notsurprisingly, theimpactvariesevenmoreatthestatelevel. .AspresentedinTable2,staffsinsevenstates- -Connecticut.D.C.,Rorida.Nevada,.\ewJersey..\ewYork,andPennsylvama-wouldloseat least8percentofMedicarepaymentforinpatientphysicianservices. ImpactofaPrototvpeTransitionOption WhentheProspectivePaymentSystem(PPS)wasimplemented,therewas geographicvariadoninadjusitdcostperadmission. To.nitii..^ J.c:..liai ii distributionalimpactofPPS.Congressenactedatransition. Giventliisprecedent,thispaper delineatesaprototypetransitionoption. Ineachregionwithamedianvolumeperadmission :'-ate>^:eedsthenationalmedian,staffswouldfacelimitsbasedona50-50blendofthe nationalandregionalmedian. Inotherregions,staffswouldfacealimitbasedonlyonthe nationalmedian. Asimpleschedulemightentailthe50-50blendforayearortwo.followed byfullimplementation. Forillustrativepurposes.Tables3and4showtheimpactbyhospitaltypeandbystate ofthistransitionoption. ThedistributionalimpactoftheHSAmedicalstaffproposalwould besubstantiallymoreequalunderthistransitionoption. ThisismostapparentfortheMiddle Atlantichospitals,whosepercentagereductionwouldfallfrom 10.5percentto4.3percentof payment,closetothenewaverage. Forregionswithmediansbelowthenationalmedian,the impactnecessarilyremainsthesame. PotentialfortheShiftingofAdmissionsamongHospitals Thispaperalsoanalyzesasecondaspectofthepolicy. Aconcemraisedbysomeis thatphysiciansmightrespondtoahigh-costmedicalstaffpolicybyshiftingtheiradmissions amonghospitalstoavoidthewithhold. Shiftingcouldthreatentheviabilityofcertain hospitals. Toshiftadmissionsintheshonrun.aphysicianmustbeamemberofatleasttwo staffs,oneofwhichisdesignatedhigh-costandoneofwhichisnot. Usingthenauonal admissionsfile,thispapercalculatedthenumberof"shiftable"Medicareadmissionsineach hospitalwithahigh-coststaff. iii Intheaveragehospitalwithahigh-coststaff,shiftabieMedicareadmissionsaccount for11percentofall(Medicareandnon-Medicare)admissions. ShiftabieMedicare admissionsalsoaccountfoi-^a-^?inepercent(i.e., II)ofMedicareadmissionsinallhospitals (i.e..withhigh-coststaffsandothers). Thesepercentagesretlectthefactthatonaverage, physiciansadmittoonlyoneandahalfhospitals. Inaddition,somephysicianshave privilegesatseveralhospitals,allofwhicharehighcost. Concernovertheviabilityofhospitalsisgreatestforhospitalsthatserveasthelast resonfortheinner-citypoor. Forthesehospitals,shiftabieadmissionsrepresentonly7 percentoftotaladmissions. Hence,suchhospitalswouldbelessvulnerabletolosing admissionsthanotherhospitals. iv I. INTRODUCTION Forseveralyears,theHealthCareFinancingAdministration(HCFA)hasfunded researchexploringoptionsforconiroUingMedicarephyo^cianpayments,eitherbydesigning paymentfor"bundles"ofphysicianservicesorbycombiningpaymentforfacilityand physicianservices. Onethrustofthisefforthasbeenresearchdirectedtowardgivingthe medicalstaffsofhospitalsincentivestocontrolservicesprovidedduringinpatientstays.' ThisresearchdevelopedthepoUcyoptions,createdthetechnicalunderpinningsneededfora numberofpolicyoptions,andexploredrelatedissues. Thisresearchisreportedinboth technicalreports--arecentonebeingWelchandMiller(1994)-andrefereedjournals-Welch (1989),MiUerandWelch(1992. 1993b),Welch,etal.(1993).Miller,Welch,andEnglert (1994),andWelch.Miller,andWelch(1994). TheClintonAdministration-sHealthSecuntyAct(HSA)includesahigh-costmedical staffpolicyasonewaytogenerateMedicaresavingstohelpfinancehealthreform. TheHSA proposalonhigh-costmedicalstaffsdrawsheavilyonthebodyofresearchnotedabove. This paperreportsthedistnbutionaiimpactoftheHSAproposal. InSections and01.thispaper descnbestheproposalandthemethodsusedtosimulatetheimpact. Ontheassumptionthat medicalstaffsdonotrespondtotheincennves.SectionIVsimulatesthedistributionalimpact oftheproposalbyr>'peofhospital(e.g..teachingstatus)andbystate. Becausetheproposal woulddisproportionatelyreducepaymentstomedicalstaffsintheMiddleAdanticregion. SecuonVsimulatesasimpletransiuonaipolicy. Finally.SectionVIanalyzesarelated Generally,tieterms hospitals'and"medicalstaffs"canbeusedmterctangea^-lv.becauseahospitalcannot ofnulnycuwohnewnitahhooustpiatamle'dsipchaylsisctaifafns(i.aec..tictosrpphoyrsaitceilaynsle).ga.,ndreavimeewdiincgalprsatacfufcceapnanootemfsu)nctuhoatnwweithusaehtohsepittearl.m Itis medicalstalf." issue--thepoienriaiforphysicianstoshiftadmissionsbetweenhospitalsinordertoavoidthe incentivesofthepolicy. ILTHEPROPOSALINTHEHEALTHSECURITYACT InSection4114ofitsHSA.theClintonAdministrationhasproposedlimiting Medicarepaymentstophysiciansinhospitalswithphysicianservicevolumeperadmission thatisconsistendyabovenauonalnorms. InagivenyearMedicare'spaymentstothe physiciansonamedicalstaffcouldnotexceed125percentofthenationalmedianforurban hospitalsand 140percentforruralhospitals. Similarlimitsarealreadyusedinotherpartsof theMedicareprogram,suchashomehealthagencies,skillednursingfacilities,and rehabilitationandpsychiatrichospitals. TheproposalwouldmeasurephysicianservicesintermsoftheRelativeValueUnits (RVUs)usedintheMedicareFeeSchedule(MFS). RVUsperadmissiondirectiymeasures physicianservicevolumeandintensityperadmission. Thatis,RVUsperadmissionvaries acrossmedicalstaffsdependingonthenumberofser\'icesandthecomplexityofservices (e.g..anMRlinsteadofanX-rayj. RVUsperadmissionwouldbeadjustedfordifferencesin patientmixacrossstaffsaswellasforteachingstatusanddisproportionatesharestatus,two characteristicsthatcontributetohigherphysicianservicesperadmission,inpan,because thesehospitalsarethoughttohandlepatientswithgreaterseverityofillness. (Disproportionatesharehospitalsserveadisproportionateshareofthepoor.) Forexpositional clarity,weusethetenn"volumeperadmission'forcaseraix-,teaching-,anddisproportionate share-adjustedRVUsperadmission.Thus,theproposalwouldmeasuretheperforraanceof medicalstaffsintermsofvolumeperadmission. ThetiSAwouilhaveHCFAcalculatethevolumeperadmissionforeachhospital medicalstaffinthecountry. HCFAwouldthenrankthenation'shospitalsfromhighestto lowestvolumeperadmission,anddesignate"high-cost"medicalstaffsonthebasisofthis ranking. PhysicianswouldcontinuetobillMedicareastheydonow. However,HCFA wouldwithhold15percentofthepaymentforanyservicedeliveredinhospitalswhose medicalstaffhadbeendesignatedashighcost. Themaximumliabilityofaphysician,in otherwords,wouldbe 15percentofhisorherMedicarebillsforinpatientservicesdelivered asamemberofahigh-costmedicalstaff. Physicianstypicallyprovide90percentoftheirinpatientservicesinasinglehospital (Miller,Welch,andEnglert. 1994). Physiciansonthemedicalstaffofmorethanonehospital wouldbetreatedaccordingtowheretheservicesweredelivered. Forexample,aphysician mightbeontwomedicalstaffs-onehigh-cost,theothernot. The 15-percentwithholdwould applyonlytoservicesdeliveredaspanofthehigh-coststaff. Financialrisksaresimilarly separatedforphysicianswhobelongtomorethanoneIndependentPracticeAssociation (IPA),atypeofHealthMaintenanceOrganization. Operationally,theHSAhigh-costmedicalstaffpolicywouldworkasfollows: In 1997.HCFAwoulddesignatecertainmedicalstaffsashigh-costonthebasisof1996 performance. In1998,HCF.A.wouldapplythe 15-percentwithholdtoservicesdelivered(in 1998)inhospitalswithhigh-costmedicalstatYs. In 1999.HCFAwouldcomparetheservices actuallydeliveredin 1998(ie.rhc:"ff:f-rfc—-r.ce)withthe 125or140percentlimit,as 3 appropriate.^ ForstaffsbelowtheUmiLtheentirewithholdwouldbereturnedwithinterest Foreachstaffabovethelimit,eithernoneoraportionofthe 15-percentwithholdwouldbe returned,dependingonhowfarabovetheumiiiwo )QQ"volumemmedouttobe. Withheld amountswouldbereturnedtothemedicalstaffasawhole,whichcouldthendecidehowto allocatethemamongitsphysicianmembers.^ Everyyearthecyclewouldbeginanew. In 1998,forexample,HCFAwouldagain designatecertainmedicalstaffstobe"highcost,"basedthistimeon 1997performance. In 1999.itwouldapplythewithholdtoservicesdeliveredinthosehospitalsin1999. In2000,it wouldcomparetheacmalphysicianservicesdeliveredin1999tothelimitandremm withheldpaymentsasappropriate. m.METHODS SectionIVpresentsthesimulatedimpactofthepolicybytypeofhospitalandby state. SectionVTpresentsananalysisofthepotentialforshiftingadmissions. Thissection brieflydescribesthebehavioralassumptionsanddatabaseconstructionfortheseanalyses. A.BehavioralAssumptions Itisimportanttonotethatthebehavioralassumptionsdifferforthesimulationof impactsandtheanalysisofshifting. InSectionIV.thesimulationoftheproposal's distributionalimpactonmedicalstaffsassumesnochangeinthebehaviorofphysicians,even -Thelimitwouldbedefinedinlennsofthemedianhospitalin1996. Thelegislationwouldnotupdatethis limitforfutureyears. "ThestaffmayrequestthattheSecr..aryofHealthandHumanSer.'.-to.w.jju .unuoviu-ccdyto physiaans.proraungthemaccordmgtothephysiaan'sservices. 'Sj^alsothatbeginnmgin2000thehmitfor urbanhospitalswoulddecreaseto120percentofthenauonalmedian. 4