Market-based reforms and the impact on quality of care: An examination of the quality impacts of the transition from hospital rate-setting to price competition in New Jersey
Market-based reforms are increasingly embraced to slow the rate of growth in health care costs, and evidence indicates that price competition reduces cost growth. The impact of such reforms on the quality of care is not well understood. The dissolution of the New Jersey (NJ) hospital rate-setting system in 1992, under which hospitals did not compete on price, along with reductions in the subsidies that financed hospital care for the uninsured, made NJ the subject of a "natural experiment" for measuring the effects of such reforms on treatment quality. The impact of the NJ reform on treatment quality is measured as the change in mortality rates and procedure utilization for NJ heart attack (AMI) patients, compared with a "control group" of AMI patients in New York, where no similar regime change occurred. The choice of AMI as the study condition allows observation of statistically similar patients before and after the change in the law since patients with AMIs are treated exclusively as hospital inpatients. Using data on 186,253 AMI hospital admissions in NJ and NY from 1990 to 1994, a statistically significant increase in AMI in-hospital mortality and decrease in cardiac procedure use in NJ relative to NY following the dissolution of the NJ rate-setting system are found. The estimated overall effects range from an increase in mortality of 0.88 to 2.19 percentage points (on a base of roughly 12 percent) and a decrease in cardiac catheterization rates of between 1.39 and 1.78 percentage points (on a base of about 35 percent) using different risk-adjustment models. The size of these effects among the uninsured was much greater: increased mortality of 4.68 to 5.99 percentage points and decreased cardiac catheterization of 10.0 to 11.3 percentage points. The results obtained using this measurement framework raise questions about the welfare implications of market-based reforms designed to reduce hospital costs, particularly among more vulnerable groups such as the uninsured.
|Year of publication:||
|Authors:||Volpp, Kevin Gerhard Ming|
|Type of publication:||Other|
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