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Hospital cost inflation under state rate-setting programs

B Biles, C J Schramm, J G Atkinson

The New England Journal of Medicine

|September 18, 1980

Summary

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Hospital cost regulation programs show improved effectiveness. States with rate-setting programs experienced slower cost increases compared to those without, challenging earlier pessimism.

Area of Science:

Health economics
Public health policy
Healthcare management

Background:

Early evaluations of state hospital cost control programs yielded largely negative conclusions regarding their effectiveness.
Significant advancements in healthcare policy and economic conditions have occurred since initial program assessments.

Purpose of the Study:

To reassess the effectiveness of hospital cost regulation by comparing states with and without comprehensive rate-setting programs.
To determine if legally mandated hospital rate-setting programs implemented in the 1970s impacted cost containment.

Main Methods:

Comparative analysis of hospital cost increases between states with and without legally mandated hospital rate-setting programs.
Data collected for the period 1970 to 1978, focusing on the last three years for trend analysis.

Related Experiment Videos

Statistical comparison of average annual percentage increases in hospital costs.

Main Results:

States with comprehensive hospital rate-setting programs demonstrated a lower average annual rate of hospital cost increase (11.2%) compared to states without such programs (14.3%) during 1976-1978.
This difference in cost increase rates was statistically significant (P < 0.05).

Conclusions:

The findings suggest that hospital rate-setting programs can be effective in controlling healthcare costs.
Previous pessimism regarding the efficacy of these programs may be unwarranted, particularly when considering data from later periods.