Venue: The Fuqua School of Business, Duke University, 1 Towerview Drive, Durham, NC 27708-0120
Presentation
Public Insurance, Private Payers, and Patient Safety
Since the early 1990s, almost all states have transferred Medicaid-eligible children into managed care plans as a way to improve access to preventive services, and to reduce health care expenditures. While there was an initial phase of entry by commercial managed care plans during that decade, by the end of the period many local Medicaid markets had become highly concentrated due to the rapid exit of these plans. In addition, in 1999, the Institute of Medicine's (IOM) report, 'To Err is Human: Building a Safer Health System,' documented the high incidence of preventable medical errors occurring in hospitals. While some previous studies have developed and tested indirect welfare implications, in terms of prices and output, of managed care monopsony power, no research has yet looked directly at the relationship between monopsony power and some measure of quality, such as rates of preventable medical error, for either private or public payers.
This study examines the effect of Medicaid payer concentration on hospital rates of preventable medical error for inpatient pediatric services (for which Medicaid pays almost 40 percent) over a relatively short (1997-2000) and long (1997-2004) period of time, with the latter period encompassing hospitals' patient-safety efforts following the IOM report.
Primary data sources for this analysis are the State Inpatient Databases (SID) from the Healthcare Cost and Utilization Project (HCUP), sponsored by the Agency for Healthcare Research and Quality (AHRQ), for four high-volume Medicaid managed care states: Arizona, Florida, New York, and Washington.
Hospital rates of medical error in 1997, 2000, and 2004 are examined for the discharges of children between 0 and 17 years of age, for two carefully selected adverse medical events, decubitus ulcer (i.e. severe pressure sore) and accidental laceration, using the latest release of the pediatric-specific patient safety indicators (PSIs) from AHRQ. Data from the SID is supplemented with hospital information from the American Hospital Association's Annual Survey of Hospitals Database, county-level data from the Area Resource File, and Medicaid enrollment data from the states' Medicaid offices.
The data are used to construct a panel of hospitals in the four states for 1997, 2000 and 2004. OLS regression of the first-difference of hospital patient-safety rates, between 1997 and 2000 ('pre-IOM'), is run against the first difference of an indicator of 'high' (>1800) Medicaid payer concentration, constructed from a modified HHI measure developed for this study, as well as first- differenced hospital- and market-level covariates. The same model is run over the longer period, between 1997 and 2004, and tests the hypothesis that hospitals' response to the IOM report, in terms of quality improvement, diminishes the relationship between managed care monopsony power and hospital safety rates observed in the 'pre-IOM' period. A two-stage least squares version of the same models, accounting for endogenous Medicaid payer concentration, with 1997 average employer size in each county serving as the identifying instrument, is also estimated.