Penn Study Finds Market-Based Competition and Decreased Subsidies for Uninsured Cases Directly Affect Patient Outcomes

(Philadelphia, PA) -- The introduction of market-based competition to New Jersey's hospitals and the state's reduction in subsidies for uninsured medical care have been linked to a relative increase in mortality rates among uninsured heart attack patients there, in a study at the University of Pennsylvania School of Medicine that compares New Jersey patient data with similar national and New York State statistics.

The Penn researchers analyzed data on 286,640 heart attack patients who were admitted to hospitals in New Jersey and New York from 1990 through 1996 -- a period in which the New Jersey health care system underwent dramatic financial reforms and cut by 50 percent its hospital subsidies for the care of uninsured patients.

They found that while mortality rates for uninsured hospital patients suffering from acute myocardial infarctions (AMIs) in New York dropped from 12 percent to 8 percent by 1996, mortality rates for New Jersey's uninsured patients increased from 7.8 percent in 1992 to 8.3 percent over the same period. During that time, the use of beneficial cardiac procedures increased at a much higher rate for New York's uninsured patients than for New Jersey's uninsured patients.

Mortality rates for insured patients declined at the same rate in both states.

"Although market-based reforms in medicine are becoming more widespread, little is known about how they affect quality-of-care," said Kevin Volpp, MD, PhD, the principal investigator for the study. He is an Assistant Professor of Internal Medicine at Penn, the Philadelphia Veterans Affairs Medical Center, and the Department of Health Care Systems at the Wharton School.

"The effects of the change in hospital reimbursement that we observed in this study represent only one segment of the patient population in one state, but may be an indication that we need to pay close attention to how cost-saving reforms may affect the quality of care across the country," Volpp said. The research is published in the April issue of Health Services Research.

In 1992, New Jersey replaced its long-established rate-setting system with the Health Care Reform and Competition Act (HCRA), instituting price competition in which contracted buyers negotiate discounts for hospitals, and each hospital competes for patients using a combination of pricing and services.

At the same time, New Jersey eliminated its 19 percent surcharge on all hospital bills, which had been dedicated to care for the uninsured. State funding for charity care dropped from $700 million in 1992 to $350 million in 1996. And as competition intensified, some hospitals were compelled to offer discounts and cut back services or other aspects of patient care in order to survive.

"While the number of hospitalized uninsured patients with AMIs did not change greatly over time, there was a relative decrease in cardiac catheterization and mechanical revascularization rates in New Jersey, " Volpp said. "This suggests that patients were treated differently (after HCRA was instituted), and that difference may have included other quality-of-care changes that we were unable to measure."

Others Penn researchers who participated in the study are: Sankey Williams, MD; Chair of the Division of Internal Medicine in Penn's Department of Medicine; Joel Waldfogel, PhD, Professor at the Wharton School; Jeffrey Silber, MD, Associate Professor of Pediatrics; J. Sandford Schwartz, MBA, MD, Professor of Medicine; and Mark V. Pauly, PhD, Chair of the Department of Health Care Systems and Professor of Public Management of Health Care Systems and Economics at the Wharton School.

The study was funded by the VA Center for Health Equity Research and Promotion, the Agency for Health Care Research and Quality (AHRQ), and the National Institutes of Health.

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Penn Medicine is one of the world’s leading academic medical centers, dedicated to the related missions of medical education, biomedical research, and excellence in patient care. Penn Medicine consists of the Raymond and Ruth Perelman School of Medicine at the University of Pennsylvania (founded in 1765 as the nation's first medical school) and the University of Pennsylvania Health System, which together form a $7.8 billion enterprise.

The Perelman School of Medicine has been ranked among the top five medical schools in the United States for the past 20 years, according to U.S. News & World Report’s survey of research-oriented medical schools. The School is consistently among the nation’s top recipients of funding from the National Institutes of Health, with $405 million awarded in the 2017 fiscal year.

The University of Pennsylvania Health System’s patient care facilities include: The Hospital of the University of Pennsylvania and Penn Presbyterian Medical Center — which are recognized as one of the nation’s top “Honor Roll” hospitals by U.S. News & World Report — Chester County Hospital; Lancaster General Health; Penn Medicine Princeton Health; Penn Wissahickon Hospice; and Pennsylvania Hospital – the nation’s first hospital, founded in 1751. Additional affiliated inpatient care facilities and services throughout the Philadelphia region include Good Shepherd Penn Partners, a partnership between Good Shepherd Rehabilitation Network and Penn Medicine, and Princeton House Behavioral Health, a leading provider of highly skilled and compassionate behavioral healthcare.

Penn Medicine is committed to improving lives and health through a variety of community-based programs and activities. In fiscal year 2017, Penn Medicine provided $500 million to benefit our community.

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