Health Econ

Chapter 10, pp. 245-246: problems 3, 4, and 10

3. {case-mix selection} Does the administrator of a hospital want to admit patients who are more sick than average or less sick than average? Does the administrator of an LTC facility want to admit patients who are sicker than average or healthier than average? Why do LTC administrators face financial incentives that are different from those that hospital administrators face?

Although more resources (expenses and length of stay) are essential to treat very sick hospital patients than less-sick patients and thus may cause the hospital to lose money, administrators of a hospital generally want to admit patients that are more sick than average because they are reimbursed more y insurers or Medicare, as all services are covered, unlike nursing homes, where they are reimbursed at a fixed daily rate.

Administrators of an LTC facility want to admit patients who are less sick than average. As stated in our text, “A patient who is very sick or whose disruptive mental condition requires frequent attention costs more than a patient who is healthy and lucid. With revenue per day fixed, a nursing home can increase profits by accepting only less costly patients who need very little care”, (p. 234). In essence, nursing homes can deny care for those who are sicker and require more time and effort. For this reason, LTC administrators face financial incentives that are different from those that hospitals face. The text reads, “To provide nursing homes with incentives to admit more severely ill patients, some states have developed case-mix reimbursement systems that increase payments based on an index of need. Whereas the starting point for acute medical case-mix reimbursement is the diagnosis, in LTC the starting point is the patient’s level of functioning. Most frequently, this is measured in terms of the number of ADLs (activities of daily living) for which the individual needs assistance (dressing, grooming, bathing, eating,...