When the growth of Medicare hospital prices is restricted or reduced, inpatient utilization and the number of staffed beds decreases, according to a study in Health Affairs.
Chapin White, PhD, senior health researcher at the Center for Studying Health System Change, and Tracy Yee, research leader at Truven Health Analytics, looked at Medicare price data in 120 metropolitan markets from 1995 to 2009 to see if there were a relationship between Medicare prices and inpatient volumes.
The researchers found Medicare prices, adjusted for case mix and other payment variables (like geographic-based payments), increased 37.5 percent from 1995 to 2009 — or only 2.7 percent per year, on average. The number of short-term general hospital staffed beds per 10,000 people declined 21.1 percent during that same time, and the average discharge rate of Medicare beneficiaries only increased 2.7 percent.
The researchers then simulated how a large Medicare price decrease would affect hospitals. If hospitals endured a 10 percent decrease in Medicare prices in 2012, discharges of elderly patients decreased by 4.6 percent, while hospital staffed beds also decreased by 6.3 percent, changes the authors said were statistically significant.
If hospitals face large cuts to Medicare, often their biggest payer, then the results suggest hospitals attempt to "reduce capacity and provide fewer services to the elderly," according to the study. Instead of leaving hospital beds empty, ramping up Medicare services or upcoding procedures, researchers said it's more likely hospitals will scale back operations. In addition, lower Medicare reimbursements are not likely to lead to cost-shifting to privately insured patients, according to a previous study by Dr. White.
This could matter as hospitals continue to face large Medicare cuts under the healthcare reform law. According to the Congressional Budget Office, the Patient Protection and Affordable Care Act will reduce Medicare expenditures to hospitals by $379 billion from 2012 to 2021, which indicates that hospital inpatient usage is also likely to be reduced dramatically.
However, researchers said a "key unanswered question" is whether a reduction in Medicare inpatient prices and utilization affects the quality of care or health outcomes of Medicare beneficiaries.
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