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Hospital productivity and intensity trends: 1980-87
1Health Economics Research, Inc., Needham, MA.
Abstract:
This paper takes advantage of a unique set of annual MONITREND data from the American Hospital Association (AHA) to study the effects of Medicare's Prospective Payment System (PPS) and other public/private programs on hospital productivity and intensity between 1980 and 1987. The results on over 30 cost centers show major improvements in inpatient productivity per discharge in the first two years of PPS--improvements that are largely attributable to shifts of care to the outpatient department. Inpatient intensity, which was growing 4.5% annually between 1980 and 1982, turned negative from 1983-85 due to this shifting locus of care. Productivity per intermediate service also improved but at a slower rate because of the large declines in inpatient volumes. Productivity improvements were greater in urban hospitals, resulting in slower cost inflation and a better financial position compared with rural hospitals.
Insights
Medicare
Area of Science:
- Health Economics
- Hospital Management
- Healthcare Policy
Background:
- The implementation of Medicare's Prospective Payment System (PPS) aimed to control healthcare costs.
- Understanding the impact of PPS on hospital operations and efficiency is crucial for healthcare policy.
- Previous studies have explored aspects of PPS, but a detailed analysis of its effect on productivity and intensity using comprehensive data was needed.
Purpose of the Study:
- To analyze the effects of Medicare's Prospective Payment System (PPS) on hospital productivity and intensity.
- To evaluate the impact of other public and private programs on hospital efficiency during the study period.
- To compare the effects of PPS on urban versus rural hospitals.
Main Methods:
- Utilized annual MONITREND data from the American Hospital Association (AHA) for the period 1980-1987.
- Analyzed data across over 30 hospital cost centers.
- Examined changes in inpatient productivity per discharge and per intermediate service, as well as inpatient intensity.
Main Results:
- Significant improvements in inpatient productivity per discharge were observed in the initial two years of PPS.
- A notable shift of care from inpatient to outpatient departments contributed to these productivity gains.
- Inpatient intensity growth reversed, becoming negative between 1983-1985, largely due to the shift in care location.
- Productivity per intermediate service also increased, albeit at a slower pace due to decreased inpatient volumes.
- Urban hospitals demonstrated greater productivity improvements, leading to slower cost inflation and better financial outcomes compared to rural hospitals.
Conclusions:
- Medicare's PPS initiated substantial inpatient productivity enhancements, primarily driven by care shifting to outpatient services.
- The system influenced hospital intensity metrics, necessitating a re-evaluation of care delivery models.
- Disparities in productivity gains between urban and rural hospitals highlight potential inequities and differing impacts of PPS across diverse healthcare settings.