New Medical Devices Invention, Development, and Use (1988) / Chapter Skim
Currently Skimming:
Impact of the Changing Medical Payment System on Technological Innovation and Utilization
Impact of the Changing Medical Payment System on Technological Innovation and Utilization
Pages 93-103
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From page 93... ...
Annual health care spending rose from about 5.5 percent of our gross national product before Medicare was enacted to more than 11 percent in 1987. Some of this additional spending may indeed be beneficial, but there are also many examples of questionable health care expenditures.
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From page 94... ...
to advise it and the executive branch on how to make PPS responsive to changing health care technologies and procedures. The Office of Technology Assessment is responsible for selecting 17 individuals representing various groups involved in the health care system to serve on the commission.
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From page 95... ...
When we suggest that there are incentives under PPS to use less health care technology, such a statement says nothing about how strong such incentives are and whether they operate across all hospitals. Unfortunately, we almost never talk about the strength of the incentives or the degree of response, which is the elasticity of supply.
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From page 96... ...
The best way to encourage doctors to admit patients to a particular hospital is to make sure that the hospital is up-to-date and has the latest technologies and equipment. MEDICAL TECHNOLOGIES, HEALTH CARE COSTS, AND THE ROLE OF ProPAC In 1977, under the auspices of the Robert Wood Johnson Foundation, a conference was held in Sun Valley, Idaho, to look at the impact of medical technology on health care costs.
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From page 97... ...
But hospitals which use these technologies only see more costs and no added revenue. The third type of technology is one that increases costs to the hospital and the health care system, but also increases the quality of medical care.
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From page 98... ...
The Health Care Financing Administration (HCFA) , however, did not go along with this recommendation.
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From page 99... ...
The add-on amount ProPAC proposed was modest and was based on what the reimbursement level should be if imagers are being used at their most efficient level. ProPAC's proposal violated some basic tenets of the DRG system: ProPAC recommended that the payment system be related to the use of a medical device and not a fixed amount per diagnosis.
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From page 100... ...
But to make this case, the commission needs to show the negative effects of the existing DRG system on development and use of medical technologies. What impact or leverage has medical care reimbursement under PPS had on the use, and ultimate manufacture, of new medical technologies?
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From page 101... ...
101 Total Inpatient Expenses Total Expenses Inpatient per: Year Expenses per Capita Expenses Capita Admission 1976 12.6 11.5 12.2 11.1 8.6 1977 8.6 7.5 8.2 7.1 5.5 1978 4.8 3.7 4.3 3.2 3.9 1979 1.9 0.8 1.8 0.7 - 0.8 1980 3.0 1.8 2.9 1.6 0.0 1981 7.6 6.5 7.2 6.2 6.3 1982 9.1 8.1 8.9 7.8 8.8 Average increase, 1976-1982 6.8 5.7 6.5 5.4 4.6 1983 6.8 5.8 6.1 5.1 6.7 1984 0.6 - 0.4 - 0.7 - 1.6 3.1 1985 2.7 1.8 0.5 - 0.4 5.7 1986a 7.0 6.2 5.1 4.2 7.7 Average increase, 1983-1986 3.5 2.5 1.6 0.7 5.5 aEstimate based on the first 8 months of 1986 compared to the first 8 months of 1985. SOURCE: American Hospital Association National Panel Survey.
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From page 102... ...
According to the Congressional Budget Office, these higher-than-expected "margins" i.e., revenues minus costswill generate $27 billion in excess hospital revenues over 5 years, or approximately $5 billion in excess revenues per year. When we examine the effect of PPS on specific medical technologies, we find that the use of higher-cost pacemakers has been growing faster than the use of their less expensive counterparts by a margin of four to one, a phenomenon many would not have expected when PPS was introduced.
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From page 103... ...
Economists deal on the margin. We complained for years that cost-based reimbursement generated the wrong incentives by paying for all the added costs of treating a patient with a more expensive procedure.
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