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Objective. The long-run cost savings potential of private sector reform efforts, such as selective contracts with providers, depends in part on the relationship between procedure-specific volume and average hospital resources that are consumed in treating patients associated with that specific procedure. Study examines a model that estimates the relationship between hospital procedure-specific volume and average hospital treatment costs, using an elective surgical procedure as an example. Data Sources. Medicare Provider Analysis and Review (MedPAR) files for 1989 for hospitalizations in which a Medicare beneficiary received a knee replacement (KR) surgery during 1989. Hospital information was obtained from the American Hospital Association's 1989 Annual Survey. All patient-level data were aggregated to the hospital level to create a data file, with the hospital as the unit of observation. Study Design. This study used administrative claims data and regression analysis to estimate the effect of hospital procedure-specific volume on average hospital treatment costs of patients receiving KR surgery. We also examined the stability of the volume-cost relationship across hospitals of different sizes. Principal Finding. The average treatment costs associated with KR surgery are inversely related to a hospital's KR volume in the regression equation estimated using all hospitals performing KR surgery. The inverse relationship between cost and volume is found to be robust for different-size hospitals. Conclusions. The potential cost savings associated with performing KR surgery at incrementally higher hospital volume level can amount to as much as 10 percent of the hospital's average treatment cost. However, the incremental cost savings associated with increased patient volume depends on the hospital's current volume level and its size. Key Words. Hospital cost, volume, elective surgery, In the evolving market-driven healthcare system, third party payers have been negotiating with hospitals for price concessions in return for being included as providers in managed care networks. These reform [...]

Objective. The aim of this study is to describe the practice variation of knee replacements (KRs) in the elderly ([greater than or equal to] 65) over time from 1985-1990 in terms of the number of primary, bilateral, and revision KRs; the extent of large area variation in performance rates; and the degree to which demographic variables are the determinants of area rates. Data Sources/Study Setting. Data analyzed are from every hospital in the United States that performed a KR on a Medicare patient during the study period. Data were obtained from the MEDPAR, HISKEW, and denominator files of the Medicare Statistical System. Study Design. This is a cohort study of all Medicare beneficiaries who received a KR between 1985 and 1990. The dependent variable in the analyses was the count of the KRs performed in each area. Data Collection/Extraction Methods. This is a population-based sample of Medicare enrollees in the United States. All hospitalizations for Medicare-reimbursed KRs were included in the initial data set. Exclusion criteria were used to identify the Medicare covered population with a definite KR. These criteria resulted in 7.3 percent exclusions and a final set of 414,079 KR hospitalizations. Principal Findings. The number of Medicare-funded KRs increased in each of the study years corresponding to an annual rate of increase of 18.45 percent. The likelihood of receiving a KR was a function of age, gender, and race. For each year, KRs were almost twice as likely to be performed on women than on men. The odds of whites getting the surgery were over 1.5 times greater than for blacks. Even after adjusting for demographic factors, significant regional variation remained. Conclusions. Much about area variation and the rate of growth in KR rates remains unexplained. For answers to emerge, better data and different types of studies are required. Key Words. Practice variation, knee replacement, outcomes research, osteoarthritis, The escalation in health care costs and the push for national and state health reform has provoked societal and governmental interest in the apparent geographic variation in the frequency of [...]

Objective. To evaluate the long-term effects of Medicaid managed care (MMC) on obstetric service use and program costs in California. Data Sources/Study Setting. Longitudinal administrative data on Medi-Cal enrollment and [...]