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