The Effects of Price Competition and Reduced Subsidies for Uncompensated Care on Hospital Mortality

Health Services Research - August 2005
Vol. 40, No. 4
August 2005
Volpp, K.G.M., Ketcham, J.D., and A.J. Epstein
pp. 1056-77

Objective. To determine whether hospital mortality rates changed inNew Jersey after
implementation of a law that changed hospital payment from a regulated system based
on hospital cost to price competition with reduced subsidies for uncompensated care
and whether changes in mortality rates were affected by hospital market conditions.

Data Sources/Study Setting.
State discharge data for New Jersey and New York
from 1990 to 1996.

Study Design.
We used an interrupted time series design to compare risk-adjusted inhospital
mortality rates between states over time. We compared the effect sizes in
markets with different levels of health maintenance organization penetration and hospital
market concentration and tested the sensitivity of our results to different approaches
to defining hospital markets.

Data Collection/Extraction Methods.
The study sample included all patients under
age 65 admitted to New Jersey or New York hospitals with stroke, hip fracture,
pneumonia, pulmonary embolism, congestive heart failure, hip fracture, or acute myocardial
infarction (AMI).

Principal Findings.
Mortality among patients in New Jersey improved less than inNew
York by 0.4 percentage points among the insured ( p5.07) and 0.5 percentage points
among the uninsured ( p5.37). There was a relative increase in mortality for patients with
AMI, congestive heart failure, and stroke, especially for uninsured patients with these
conditions, but not for patients with the other four conditions we studied. Less competitive
hospital markets were significantly associated with a relative decrease in mortality among
insured patients.

Market-based reforms may adversely affect mortality for some conditions
but it appears the effects are not universal. Insured patients in less competitive
markets fared better in the transition to price competition.

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