State deregulation may decrease cost of CABG

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States that terminated Certificate of Need (CON) regulations for cardiac care experienced lower costs per CABG patient after the regulations were dropped and no changes in cost per PCI patient, according to a study published online Oct. 2 in Medical Care Research and Review.

Lead author Vivian Ho, PhD, of the Baker Institute for Public Policy at Rice University in Houston, and colleagues used multivariable regressions to analyze the per patient costs of CABG and PCI in states that eliminated CON requirements between 1996 and 1998. They identified changes in average costs and Medicare reimbursement for CABG and PCI before and after CON requirements were dropped.

The researchers also compared trends in costs and reimbursement in states that retained the CON versus states that dropped it. They conducted separate regressions for CABG and PCI.

Ho and colleagues collected data on Medicare beneficiaries aged 65 and older who underwent CABG or PCI (including stents) procedures between 1991 and 2002. They estimated patient costs by multiplying total charges in the Medicare claims data by hospital and year-specific cost-to-charge ratios derived from Medicare cost reports (excluding outpatient service cost centers).

The researchers estimated reimbursement by adding the Medicare diagnosis related group (DRG) price to outlier payments (if any) and the pass-through amount. Costs and reimbursement were adjusted to reflect 2002 dollars.

The study excluded patients whose costs exceeded $500,000, where coding errors were assumed and from hospitals that performed fewer than three CABG or PCI procedures per year.

Noting that economies of scale may influence the costs of complex procedures, they included the number of CABG or PCI procedures performed by the admitting hospital during the year the patient was treated as a variable in their analysis. They adjusted for risk by including variables derived from data on sex, age, race, median household income, comorbidities, acute MI at admission, transfer or emergent cases and CABG and PCI specific treatments.

Because higher managed care penetration has been associated with lower costs, Ho and colleagues included degree of managed care penetration as a hospital and market-level variable. To account for the possibility that increased competition impacted cost, the researchers included as a variable an index of market concentration. The analysis also included a relative measure of labor costs.  

The authors wrote that they took into account the year that the state in which the hospital is located dropped CON requirements, "to allow for the possibility that hospitals that enter the market after CON regulations are lifted may have costs that differ from those of incumbents." 

The final sample contained data from approximately 1.43 million CABG procedures and approximately 1.72 million PCI procedures. The data showed that mean costs for both CABG and PCI fell substantially in the early 1990s, and the researchers found that lifting CON regulations resulted in a mean cost reduction of 4.2 percent for CABG. However, there did not appear to be a relationship between reduced cost per patient and CON deregulation for patients who underwent PCI.  

Mean Medicare reimbursement dropped 8.4 percent per patient after CON deregulation for CABG and 4.3 percent for PCI.  

"We find that the cost savings for direct patient care associated with removing CON regulations ($248.6 million) slightly exceed the fixed costs of new CABG facilities that entered the market after deregulation ($244.5 million)," the authors wrote. "These findings, combined with previous studies suggesting that CON for open heart surgery does not improve the quality of patient care, call into doubt the value of these regulations for CABG surgery."