Cost Implications of Hospital Unionization: A Behavioral Analysis

The growth of unionization among hospital workers was sharply accelerated by the 1974 amendments to the NLRA covering voluntary hospital workers. With continuing inflationary pressures in the hospital sector, the cost implications of the recent and projected growth of hospital unions is of some concern to policy-makers . This paper presents estimates of union cost impacts based on data from hospitals in the states of Maryland, Massachusetts, New York, and Pennsylvania. Cross-sectional regressions with data for 1975 yield positive union impacts of 3.3 percent on total costs, 4.1 to 5.9 percent on cost per case, and 6.1 percent on cost per day. Re-estimation of the model with data on changes over the 1971 -75 period yields similar results. We also find that the cost impact of unionization varies with the pattern of coverage (being lower for service employees and RN's) and with the extent of cost-based reimbursement. This suggests that future cost impacts of union growth may be moderated as prospective payment systems for hospital s become more widespread.

Hospital Admissions, Length of Stay, and Case-Mix Impacts of Per Case Payment: The Maryland Experience

Maryland has simultaneously operated per case - and per service hospital payment systems since 1976 with varying levels of stringency in setting per case rates. Regression analyses of this experience are used to compare the impacts of these systems on admissions, length of stay, and case-mix costliness for the period July 1, 1976 to June 30, 1981. Our results indicate a positive effect on admissions and negative effects on case-mix and length of stay for the per case payment approach relative to the per service approach. More stringent levels of per case payment are associated with stronger utilization responses.

Pricing, Patent Loss and the Market For Pharmaceuticals

Empirical studies suggest that entry of generic competitors results in minimal decreases or even increases in brand-name drug prices as well as sharp declines in brand-name advertising. This paper examines circumstances under which this empirical pattern could be observed. The analysis focuses on models where the demand for brand-name pharmaceuticals is divided into two segments, only one of which is cross-price-sensitive. Brand-name firms are assumed to set price and advertising in a Stackelberg context; they allow for responses by generic producers but the latter take decisions by brand-name f inns as given. Brand-name price and advertising responses to entry are shown to depend upon the properties of the reduced-form brand-name demand function. Conditions for positive price responses and negative advertising responses are derived. We also examine the implications for brand-name price levels, and for the brand-name price response to entry, of health sector trends (such as increasing HMO enrollments) that may have the effect of expanding the size of the cross-price-sensitive segment of the market. The paper concludes with a review of recent empirical research and suggestions for future work on the effects of generic entry.

"Generic Entry and the Pricing of Pharmaceuticals"

During the 1980s the share of prescriptions sold by retail pharmacies that was accounted for by generic products roughly doubled. The price response to generic entry of brand-name products has been a source of controversy. In this paper we estimate models of price responses to generic entry in the market for brand-name and generic drugs. We study a sample of 32 drugs that lost patent protection during the early to mid-1980s. Our results provide strong evidence that brand-name prices increase after entry and are accompanied by large price decreases in the price of generic drugs.

The Role of Consumer Knowledge of Insurance Benefits in the Demand for Preventative Health

In 1992, the United States Centers for Medicare and Medicaid Services (CMS) introduced new insurance coverage for two preventive services influenza vaccinations and mammograms. Economists typically assume transactions occur with perfect information and foresight. As a test of the value of information, we estimate the effect of consumer knowledge of these benefits on their demand. Treating knowledge as endogenous in a two-part model of demand, we find that consumer knowledge has a substantial positive effect on the use of preventive services. Our findings suggest that strategies to educate the insured Medicare population about coverage of preventive services may have substantial social value.

Hospital Cost and Efficiency Under Per Service and Per Case Payment in Maryland: A Tale of the Carrot and the Stick

The simultaneous operation of per case and per servicepayment systems in Maryland, and the varying levels of stringency used in setting per case rates allows comparison of effects of differing incentive structures on hospital costs. This paper presents such a comparison with 1977-1981 data. Cost per case and total cost regressions show evidence of lower costs only when per case payment limits are very stringent. Positive net revenue incentives appear insufficient to induce reductions in length of stay and in ancillary services use. Our results suggest these changes in medical practice patterns are more likely under the threat of financial losses.

Alcohol Interventions for Trauma Patients Treated in Emergency Departments and Hospitals: A Cost Benefit Analysis

Summarizes a study of whether screening for problem drinking and interventions to reduce alcohol intake in hospital trauma centers reduce the direct cost of injury-related health care. Compares the costs of injury recidivism with and without intervention

Using Target Efficiency to Select Program Participants and Risk-Factor Models: An Application to Child Mental Health Interventions for Preventing Future Crime

Statistical risk factor models are often proposed for screening high-risk children to participate in early intervention programs. Recent contributions to the program evaluation literature demonstrate the need for incorporating judgments about relative importance of false positives versus false negatives in screening. This paper formalizes these judgments as commensurable economic costs and benefits and applies them to demonstrate an approach to participant selection motivated by the standard cost-benefit criterion of maximizing expected net benefits. Implications of this approach are explored using data from a mental health prevention trial. We illustrate the response of expected net benefits to the choice of a selection risk level, the sensitivity of the optimal selection risk level to per participant cost/benefit magnitudes, and the use of the target-efficiency approach for choosing among alternative risk-factor models. Several strategies that directly incorporate expected net benefit maximization as a criterion in the model estimation process are also examined.