Problem. One of the basic objectives of New York State’s Health Care Reform Act of 1996 (HCRA) was abolishing New York’s system of hospital rate regulation, using price competition to contain hospital costs. The core question for this study is whether, in fact, HCRA has succeeded in these objectives by focusing on its effects on hospital prices, expenses and revenue.
Methods. This study tested the price competition hypothesis directly. We analyzed transaction prices between MCOs and hospitals, hospital operating expenses and revenues for the 1995-1998 period spanning the implementation of HCRA in January 1, 1997. Prices were derived from the Annual Reports files by all Health Maintenance Organizations; hospital expenses, revenues and utilization, from the Institutional Cost Reports that hospitals file annually. These data were supplemented by NYS hospital discharge data and census data. We then analyzed the relationship of hospital prices, expenses and revenues to a variety of plan, hospital and market characteristics using multivariate techniques. One of the key variables is the Hischmann-Herfindahl Index (HHI) which measures the competitiveness of the hospital’s market ie how many alternatives the plan has in that market.
Results/Conclusions. We found that hospitals in less competitive markets had lower price increases. The percent of a hospital’s patients coming from the HMO was an important predictor as well. Hospital expenses and revenues both increased more slowly for hospitals located in more competitive markets. The results of this study confirm how rapidly hospital and HMO behavior can change with a change in the legal/policy environment.
Learning Objectives: 1. To understand the changes in hospital reimbursement that resulted from enactment of HCRA. 2. To learn what economics theory predicts how hospital, revenues expenses and prices should respond from such a change in reimbursement. 3. To assess the evidence presented regarding the observed changes in hospital revenues, expenses and prices. 4. To consider the policy implications of these results.
Keywords: Competition, Hospitals
Presenting author's disclosure statement:
Organization/institution whose products or services will be discussed: None
I do not have any significant financial interest/arrangement or affiliation with any organization/institution whose products or services are being discussed in this session.