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Hospital resource allocation decisions when market prices exceed Medicare prices
1Department of Health Policy and Management, Johns Hopkins Bloomberg School of Public Health, Baltimore, Maryland, USA.
Objective:
To examine nonprofit hospitals' financial and spending allocations when the private sector payment rate is higher than the Medicare's payment rate.
Data Sources:
Hospital financial data for 2014-2018 from Center for Medicare and Medicaid Services Hospital Cost Reports, hospital characteristics from the American Hospital Association (AHA) Annual Survey.
Study Design:
Hospital and year level fixed effects regressions modeling each hospital's (1) operating net income per discharge equivalent (DE); (2) administrative cost per DE; (3) patient care cost per DE; (4) registered nurse per bed; charity care cost per DE; and (5) provision of unprofitable services as a function of the private sector to Medicare payment ratio (PMR).
Data Collection/Extraction Methods:
Hospital/year-level data from hospital cost reports merged with AHA data. Samples included general short-term hospitals with nonprofit ownership, excluding critical access hospitals.
Principal Findings:
The final sample included a total of 8862 hospital-year observations, with a mean PMR of 1.62. Nonprofit hospitals having a 0.1 higher PMR were associated with $257 (95% CI: $181-$334) increase in operating net income per DE; $66 (95% CI: $32-$99) increase in administrative cost per DE; $170 (95% CI: $120-$220) increase in patient care cost per DE; and $18 (95% CI: $10-$25) increase in charity care cost per DE. We found hospitals hired 0.86 (95% CI: -0.08 to 1.81) more registered nurses per 100 beds, but no evidence on providing more beds for unprofitable services, such as obstetric care, burn care, alcohol/drug abuse treatment, or psychiatric care.
Conclusions:
Higher private sector prices led primarily to greater surplus and administrative cost for nonprofit hospitals and smaller increases in spending on services that will directly benefit patients.
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