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State deregulation and Medicare costs for acute cardiac care
Vivian Ho1, Meei-Hsiang Ku-Goto
1Baker Institute for Public Policy, Rice University, Houston, TX 77005, USA. vho@rice.edu
Insights
Certificate of Need (CON) regulations for cardiac surgery did not improve quality and increased patient costs. Deregulation led to lower costs for coronary artery bypass graft (CABG) surgery, suggesting CON laws may not be justified.
Area of Science:
- Health Economics
- Healthcare Policy
- Cardiac Surgery Outcomes
Background:
- Certificate of Need (CON) regulations are debated for their impact on healthcare quality and costs.
- Previous research indicates CON laws for cardiac care did not enhance quality.
- The effect of CON regulations on patient costs remains less understood.
Purpose of the Study:
- To analyze the impact of dropping CON regulations on patient costs and Medicare reimbursements for specific cardiac procedures.
- To determine if states removing CON for cardiac care experienced changes in costs for Coronary Artery Bypass Graft (CABG) and Percutaneous Coronary Interventions (PCI).
Main Methods:
- Analysis of Medicare data spanning from 1991 to 2002.
- Comparison of costs and reimbursements for CABG and PCI in states with and without CON regulations.
- Evaluation of the financial balance between cost savings and fixed costs of new facility entry post-deregulation.
Main Results:
- States that eliminated CON regulations saw lower per-patient costs for CABG surgery, but not for PCI.
- Average Medicare reimbursements decreased for both CABG and PCI in states that dropped CON.
- Cost savings from CON deregulation for CABG surgery exceeded the fixed costs of newly established facilities.
Conclusions:
- CON regulations for CABG surgery may not be justifiable based on quality improvements or cost control.
- Deregulation of CON for CABG surgery demonstrated potential for cost savings.
- The findings suggest a re-evaluation of CON laws in the context of cardiac care cost-effectiveness.
Abstract:
Past literature suggests that Certificate of Need (CON) regulations for cardiac care were ineffective in improving quality, but less is known about the effect of CON on patient costs. We analyzed Medicare data for 1991-2002 to test whether states that dropped CON experienced changes in costs or reimbursements for coronary artery bypass graft (CABG) surgery or percutaneous coronary interventions. We found that states that dropped CON experienced lower costs per patient for CABG but not for percutaneous coronary intervention. Average Medicare reimbursement was lower for both procedures in states that dropped CON. The cost savings from removing CON regulations slightly exceed the total fixed costs of new CABG facilities that entered after deregulation. Assuming continued cost savings past 2002, the savings from deregulating CABG surgery outweigh the fixed costs of new entry. Thus, CON regulations for CABG may not be justified in terms of either improving quality or controlling cost growth.
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