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November 11, 1988, Vol 260, No. 18 >
ARTICLE | November 11, 1988

Competition, Regulation, and Hospital Costs, 1982 to 1986 FREE

James C. Robinson, PhD; Harold S. Luft, PhD
[+] Author Affiliations

Reprint requests to Department of Social and Administrative Health Sciences, School of Public Health, University of California, Berkeley, CA 94720 (Dr Robinson).


JAMA. 1988;260(18):2676-2681. doi:10.1001/jama.1988.03410180084034
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References

We used data on 5490 nonfederal, short-term general hospitals to evaluate the relative effectiveness of regulatory and market-oriented cost-control policies on hospital cost inflation between 1982 and 1986. All-payer rate-regulation programs reduced inflation rates by 16.3% in Massachusetts, 15.4% in Maryland, and 6.3% in New York, compared with the control hospitals in 43 states with neither all-payer rate regulation nor an aggressive market-oriented strategy. New Jersey hospitals experienced a rate of cost inflation similar to the control hospitals. Given the effectiveness of its regulatory program in the 1970s, however, New Jersey began and ended the period from 1982 to 1986 with the lowest costs, controlling for wages and patient mix. California's market-oriented cost-control policy reduced inflation rates by 10.1%. Hospitals with large percentages of patients insured by Medicare's prospective payment system experienced cost inflation rates 16.1% lower than hospitals with small percentages of Medicare patients. Investor-owned hospitals experienced rates of cost increase 11.6% higher than private nonprofit hospitals and 15.0% higher than public hospitals.

(JAMA 1988;260:2676-2681)

REFERENCES

1 +
Feder J, Hadley J, Zuckerman S:  How did Medicare's prospective payment system affect hospitals? N Engl J Med 1987;;317:867-872.
2 +
Thorpe KE:  Does all-payer rate setting work? The case of the New York prospective hospital reimbursement methodology . J Health Polit Policy Law 1987;;12:391-408.
3 +
Cohodes D, Eby C:  What do we know about rate-setting? J Health Polit Policy Law 1985;;10:299-327.
4 +
Hsiao WC, Dunn DL:  The impact of DRG payment on New Jersey hospitals . Inquiry 1987;;24:212-220.
5 +
Salkever DS, Steinwachs DM, Rupp A:  Hospital cost and efficiency under per service and per case payment in Maryland: A tale of the carrot and stick . Inquiry 1986;;23:56-66.
6 +
Sloan FA:  Regulation and the rising cost of hospital care . Rev Econ Stat 1981;;63:479-487.
7 +
Schramm CJ, Renn SC, Patrick JA, et al: A Study of the Effectiveness of Medicare Waivers and the Efficacy of State All-Payer Hospital Systems . Baltimore, Johns Hopkins Center for Hospital Finance and Management, 1987;.
8 +
Breyer F:  The specification of a hospital cost function: A comment on the recent literature . J Health Econ 1987;;6:147-158.
9 +
Garnick DW, Luft HS, Robinson JC, et al:  Appropriate measures of hospital market areas . Health Serv Res 1987;;22:69-90.
10 +
Augustyniak S:  Some econometric advantages of panel data , in Five Thousand American Families—Patterns of Economic Progress . Ann Arbor, University of Michigan Institute for Social Research, 1981;, vol 9.
11 +
Robinson JC, Luft HS:  Competition and the cost of hospital care 1972 to 1982 . JAMA 1987;;257:3241-3245.
12 +
Robinson JC, Luft HS:  The impact of hospital market structure on patient volume, length of stay, and the cost of care . J Health Econ 1985;;4:333-356.
13 +
Morrisey M, Conrad D, Shortell S, et al:  Hospital rate review: A theory and an empirical review . J Health Econ 1984;;3:25-47.
14 +
Held P, Pauly M:  Competition and efficiency in the end stage renal disease program . J Health Econ 1983;;2:95-118.
15 +
Aaron H, Schwartz WB: The Painful Prescription: Rationing Hospital Care . Washington, DC, The Brookings Institution, 1984;.
16 +
Luft HS, Robinson JC, Garnick DW, et al:  The role of specialized clinical services in competition among hospitals . Inquiry 1986;;23:83-94.
17 +
Robinson JC, Garnick DW, McPhee SJ:  Market and regulatory influences on the availability of coronary angioplasty and bypass surgery in US hospitals . N Engl J Med 1987;;317:85-90.

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1 +
Feder J, Hadley J, Zuckerman S:  How did Medicare's prospective payment system affect hospitals? N Engl J Med 1987;;317:867-872.
2 +
Thorpe KE:  Does all-payer rate setting work? The case of the New York prospective hospital reimbursement methodology . J Health Polit Policy Law 1987;;12:391-408.
3 +
Cohodes D, Eby C:  What do we know about rate-setting? J Health Polit Policy Law 1985;;10:299-327.
4 +
Hsiao WC, Dunn DL:  The impact of DRG payment on New Jersey hospitals . Inquiry 1987;;24:212-220.
5 +
Salkever DS, Steinwachs DM, Rupp A:  Hospital cost and efficiency under per service and per case payment in Maryland: A tale of the carrot and stick . Inquiry 1986;;23:56-66.
6 +
Sloan FA:  Regulation and the rising cost of hospital care . Rev Econ Stat 1981;;63:479-487.
7 +
Schramm CJ, Renn SC, Patrick JA, et al: A Study of the Effectiveness of Medicare Waivers and the Efficacy of State All-Payer Hospital Systems . Baltimore, Johns Hopkins Center for Hospital Finance and Management, 1987;.
8 +
Breyer F:  The specification of a hospital cost function: A comment on the recent literature . J Health Econ 1987;;6:147-158.
9 +
Garnick DW, Luft HS, Robinson JC, et al:  Appropriate measures of hospital market areas . Health Serv Res 1987;;22:69-90.
10 +
Augustyniak S:  Some econometric advantages of panel data , in Five Thousand American Families—Patterns of Economic Progress . Ann Arbor, University of Michigan Institute for Social Research, 1981;, vol 9.
11 +
Robinson JC, Luft HS:  Competition and the cost of hospital care 1972 to 1982 . JAMA 1987;;257:3241-3245.
12 +
Robinson JC, Luft HS:  The impact of hospital market structure on patient volume, length of stay, and the cost of care . J Health Econ 1985;;4:333-356.
13 +
Morrisey M, Conrad D, Shortell S, et al:  Hospital rate review: A theory and an empirical review . J Health Econ 1984;;3:25-47.
14 +
Held P, Pauly M:  Competition and efficiency in the end stage renal disease program . J Health Econ 1983;;2:95-118.
15 +
Aaron H, Schwartz WB: The Painful Prescription: Rationing Hospital Care . Washington, DC, The Brookings Institution, 1984;.
16 +
Luft HS, Robinson JC, Garnick DW, et al:  The role of specialized clinical services in competition among hospitals . Inquiry 1986;;23:83-94.
17 +
Robinson JC, Garnick DW, McPhee SJ:  Market and regulatory influences on the availability of coronary angioplasty and bypass surgery in US hospitals . N Engl J Med 1987;;317:85-90.

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