Does Managed Care Reduce the Amount of Charity Care Physicians Provide?

1. Does Managed Care Reduce the Amount of Charity Care Physicians Provide? Carol J. Simon, PhD Boston University William D. White, PhD Yale University Rana Charaffedine, MPH Boston University We are grateful for support provided by the Robert Wood Johnson Foundation , HCFO program

2. Introduction • The provision of charity care is the last resort for uninsured and underinsured persons • Private physicians have traditionally been a significant source of charity care • Recently, concerns were raised about the impact of managed care on the provision of charity care • Cunningham, et al NEJM: Using the CTS, managed care is related to significantly lower provision of CC • Issue: lack controls for practice type and specialty

3. Framework: whyMDs provide Charity Care? • Labor theories of non-wage activities: Physician allocates time between wage and non-wage activities as a function of preferences and factors affecting opportunity cost of his/her time (Becker, Culler and Ohsfelt, Rizzo and Emmons) • Opportunity cost (OC) of time depends on Hourly “wage”--Higher wage, higher OC, substitution effect  less care • Income effects: if CC strongly normal good higher wage may increase CC at some point • Analogous to back-bending labor supply

4. :If you believe what physicians say.. • Qualitative field research 2000-2001 • Many MDs voice a sense of obligation to provide care for those unwilling to pay • But sharply tempered by : • Own availability time • Practice setting • Profitability: No margin, no mission • Gray area decision making: What is bad-debt versus charity care?

5. Hypotheses • Prices matter: • Physicians’ own time • Cost of other practice resources & practice setting • Managed care/market changes have affected prices • Impact varies across markets and specialties • Higher demand primary care, less specialty • Shift to larger practices, increases “cost” of using practice resources for individual benefit • “Disequilibrium” • wages and prices (administered) don’t fully adjust in SR, may have excess capacity, lags • No margin no mission: • Charity is a normal good • Physicians respond to local demand for charity care • transitory demand from existing patients– unemployment

6. Why Managed Care affects the balance • Managed care has shifted demand for physician services • demand up for PCPs, down for specialists (market effects– wages & incomes) • Managed care has changes practice styles & Organization • incentives for higher physicians productivity • benchmarking reduces discretionary action • selective contracting increases patient volumes • Shift towards larger practices, employee vs. owners

7. Data • 1996-1997 Community Tracking Study Physician Survey(CTS) • 12,000 physicians in 60 communities • individual and practice characteristics of MDs • Stratified sample • Managed care penetration data 1994-1995, (Inforum, AMA) Area Resource File (1998) for other market level data

8. Simple statistics..Average Hours of Charity Care are lower as managed care increases

11. Methods • Multivariate regression analysis to estimate models • Regressions weighted to reflect the complex sample design of the CTS • Alternatively estimated using Tobit, ordered probits, separate estimates of decision to offer, and hours provided • Endogenous Managed Care, Physician Supply • Exclusion criteria: • Staff/group HMO physicians, psychologists,OBGYN, and physicians with extreme/censored characteristics for key variables (e.g. top coded income at 300k) • Final sample: 9068physicians

12. Charity Care– CTS Question • “During the last month, how many hours, if any, did you spend providing charity care? By this we mean, that because of the financial need of the patient you charged either no fee or a reduced fee. Please do not include time spent providing services for which you expected, but did not receive payment (i.e., bad debt)”.

13. Empirical Model

14. Preliminary results • Estimated models wls, and endogenous MC • Unsuccessful in estimating physician income or wage equations • Estimates reasonably stable across alternative specifications • Important to distinguish between PCPs and Specialists

15. Practice managed care contracting affects ability to provide charity care • Managed care contracting has a chilling effect on charity care • PCPs in high MC practices cut CC by approx 26% • No significant effect on Specialists

16. Practice Involvement in Managed Care crowds out Charity Care in PCPs, no significant effect for specialists

17. At the market level, higher managed care reduces physicians’ provision of charity care

18. Findings: Practice organization and ownership matter • Owners provide 90% more Charity Care than employees • Solo/2 MD practices provide 28% more Charity Care than larger group physicians

19. No Margin.. No Mission.. PCPs in more profitable practices provide more care

20. As opportunity cost rises, charity care falls

21. Physicians respond to community demand • Charity care is higher in localities with higher uninsured • moving from low to high unemployment rates markets increases the provision of CC by 24% • No effect of health status (infant mortality rate), perverse effect of “uninsured” (-)

22. More results • Specialty has no independent effect • Specialists provide more care due to differences in wages, income and managed care effects • Practice type also doesn’t explain much • tho physicians in medical school practices provide more CC • NO effect of Community Health Centers… small numbers? • Men, board certified physicians provide more care • No impact of IMG • Closed to Medicaid, provide less charity care (little effect if drop this) • Higher private patient loads – less care • Adding more information about form of payment (eg capitation) physician compensation does little

23. Conclusions • Higher “wages” reduce charity care, particularly among PCPs • Excludes impact of MC on measured wages • Market-level effects of managed care reduce care • Are we capturing unmeasured wage effects? • Or spillovers affecting norms of care • Practice level involvement further reduces CC among PCPs • Insignificant effect for specialists

24. Conclusions -- cont • Managed care may have a strong negative impact thru its effect on practice organization and physician autonomy as well • trends suggest continuing decline in solo MDS and rise in employees • -- decline in practice autonomy? • -- less ability of physicians to use practice resources for charitable means?

25. Implications for policy • Continued changes in competition and practice organization may threaten a traditional part of the health care safety net • trade-offs between efficiency in the private sector and ability of physicians to carry out a ‘charitable’ mission • impact is greatest in primary care – where impact of managed care, practice organization and earnings combine to reduce charity care--exacerbating conditions in underserved communities