• Early concerns of hospital cost shifting

    From page 388 of Paul Starr’s The Social Transformation of American Medicine:

    [In the early 1970s], the commercial insurance companies worried that if the government tried to solve its fiscal problems simply by tightening up cost-based reimbursement, the hospitals might simply shift the costs to patients who pay charges, which would force up commercial insurers’ rates and make them less competitive with Blue Cross. Hence the commercial insurance industry began to favor more comprehensive responses, such as community health planning or state regulation of hospital charges.

    In the endnote for this passage, Starr cites

    Orsini L. 1974. Hospital Financing: Public Accountability–The Case of Rates Prospectively Determined by State Agencies for All Patients. Viewpoint. Health Insurance Association of America. January.

    I am unable to find a copy of this paper. As a student of cost shifting, I would love to read it.

    This is my last planned post on Starr’s book (all posts about it found under the STAM tag). It was published in 1982, nearly 30 years ago. Though many of the issues described are relevant today, it would seem an update would be worthwhile. I’d certainly read it.

    • Try this for an update to STAM


      “Social Transformation Twenty Years On,” in “Transforming American Medicine: A Twenty-Year Retrospective on The Social Transformation of American Medicine, ed. by Keith Wailoo, Timothy Stoltzfus Jost, and Mark Schlesinger, Journal of Health Policy, Politics, and Law 29 (4/5, 2004), 1005-1019.

    • Jamie Robinson’s Corporate Transformation of Medicine picks up from where Starr ends.

    • Also, call AHIP and see if they have a copy of Orsini’s work. That’s the new name for HIAA.

    • An important point to keep in mind is that back in the 70s insurers did not have contracted networks. They just paid a usual and customary rate, so hospitals could very easily cost shift in those days. After the dominance of network-based manged care around 1994, cost shifting takes on a new dimension. The hospital must argue for a higher rate than the Medicare cost trend (and GDP growth trend, etc.) and win the negotiation to get it. So any cost shifting that continued to occur after the mid 90s indicates a weak negotiating position for insurers and PPO networks.