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Certificate of Need and the Price Paid for Inpatient Services for Privately Insured Patients

Certificate of Need and the Price Paid for Inpatient Services for Privately Insured Patients. William S. Custer, Ph.D., Robinson College of Business Patricia Ketsche, Ph.D., Robinson College of Business Mei Zhou, MS, Georgia Health Policy Center

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Certificate of Need and the Price Paid for Inpatient Services for Privately Insured Patients

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  1. Certificate of Need and the Price Paid for Inpatient Services for Privately Insured Patients William S. Custer, Ph.D., Robinson College of Business Patricia Ketsche, Ph.D., Robinson College of Business Mei Zhou, MS, Georgia Health Policy Center Dawuud Ujamaa, MS, Georgia Health Policy Center This research was supported by funding from the Department of Community Health and the Georgia Commission on the Efficacy of the Certificate of Need Program.

  2. Why study CON……AGAIN? • Extensive literature that indicates that CON affects markets but has little or no effect on hospital costs and does not slow health care cost inflation: • Salkever and Bice (1976, 1979) • Sloan and Steinwald (1980); Sloan (1981) • Joskow (1981) • Farley and Kelly (1985) • Sherman (1988) • Conover and Sloan (1998)

  3. States with recent / current CON study groups or commissions Georgia Maryland Michigan Missouri North Carolina Illinois Washington Commissions presented with non-peer reviewed studies suggesting that CON controls / reduces cost Often commissioned by hospitals and hospital associations Policymakers weigh prior peer reviewed studies equally with consultant reports and anecdotal evidence Evidence Is Not Widely Accepted

  4. Georgia Commission Asked: • Does CON restrict the supply of services? • Does CON affect consumer costs? • Does CON affect the quality of health care services? • Does CON affect hospitals’ abilities to provide care to the uninsured?

  5. Research Methods • Compared Georgia to 10 other states with varying degrees of CON rigor. Surveyed states and found • 3 non-CON states • 4 states with less rigorous CON programs • 3 states with comparable CON programs • Used hospital discharge data to define markets using patient flows

  6. Market Structure • Hospital Competitiveness - HHI • Most markets above FTC guidelines for competitive markets • Markets in general have become less competitive • No association between change in competitiveness and CON • Tier 2 CON states are significantly associated with less competitive markets

  7. Data / Methods • Study of prices paid by private patients • If there are economies of scale/ scope, CON could lower production costs • If CON restricts competition incumbent providers could raise prices to private payers • Assume public payments are unrelated to CON • MedStat private inpatient claims data for 2 years • Estimated reduce form price equation (fixed effects)

  8. Findings • CON is associated with higher inpatient prices for privately insured patients • The effect is robust with respect to: • Diagnosis and procedure • Specification of CON as binary or ranked by rigor • Effect of CON on inpatient costs is smaller in rural areas • The number of Ambulatory Surgery Centers per capita is associated with higher utilization rates and higher inpatient prices

  9. Other Findings • CON has no measurable effect of hospital quality • CON has no measurable effect on access for the uninsured • However, in CON markets the ambulatory care sensitive (ACS) admissions for the uninsured were higher

  10. Implications of the Findings • If CON reduces production costs, privately insured consumers do not benefit • CON could reduce the need to explicitly subsidize providers through taxes and provider payments • CON and Medicaid reimbursement may not be independent

  11. Arguments Made by Stakeholders • Argument 1: Hospitals require CON to ensure access • We do not see higher admission rates per uninsured • We do not see evidence of improved primary care access for the uninsured • Argument 2: Hospitals require CON to ensure quality • We see no association between quality outcomes and CON

  12. Conclusion • Additional (recent) peer reviewed research is needed to inform the ongoing debate. • Findings suggest the need for broader analysis of the distributional effect of CON on health care costs • Importance of translational work to make the entire body of research accessible and useful to policymakers.

  13. Certificate of Need and the Price Paid for Inpatient Services for Privately Insured Patients William S. Custer, Ph.D., Robinson College of Business Patricia Ketsche, Ph.D., Robinson College of Business Mei Zhou, MS, Georgia Health Policy Center Dawuud Ujamaa, MS, Georgia Health Policy Center This research was supported by funding from the Department of Community Health as part as part of a larger analysis of the effect of CON in Georgia on cost, quality, and access.

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