Reinhardt on reform. Interview by Donna Vavala

Almost since the federal government took its giant step into health care delivery and financing in 1965 with Medicare and Medicaid, the emphasis in Washington has been on reducing the costs of health care. Almost all federal health law subsequent to those two programs has been aimed at cost control, even when the titles of the bills promised a more noble purpose. The most notable exception is the law establishing end-stage renal disease coverage, but it has become a prime exacerbator of rising costs. Not even the designers of the federal programs envisioned how quickly health care costs would rise and how substantial the increases would be. The federal tab in 1993 was $280.6 billion. In 1960, it was $3 billion and in 1970 it was $17.8 billion. And overall health care costs have followed a similar curve, growing from 5.3 percent of the U.S. GDP in 1960 and 7.4 percent in 1970 to 13.8 percent in 1993. The end is not in sight. Economists are predicting growth to 18 percent of GDP by the next century. Uwe E. Reinhardt, PhD, James Madison Professor of Political Economics in the Woodrow Wilson School at Princeton University, does not believe that the "bite" will become that large, but he does expect increases to continue into the near future. In the interview recorded in this article, Professor Reinhardt assesses both the current and his predicted financial scenario for the health care field.     

Fraud and abuse: the payer's perspective

As the health care sector consumes an ever-increasing portion of our nation's gross national product (GNP)), forecast to represent 15 percent of the GNP by the year 2000, increasingly intensive efforts are being used to control the growth rate of these costs. Medicare fraud alone is estimated to represent $2 billion yearly. Abusive billing of private health insurers represents a far larger amount. This article discusses the concept of fraudulent and abusive physician billing practices.     

Health care costs tied to many issues

Although, in 1990, the United States spent about $750 billion (12.2 percent of the Gross National Product) on health care, 31-37 million people in this country are uninsured. Another 4 million people are thought to be underinsured. We have one of the highest infant mortality rates among developed industrialized nations and rank 19th in health care and well-being among those nations. Our life expectancy is lower than those of some third-world countries. The United States and South Africa are the only two industrialized nations without a national health care policy. In spite of these statistics, U.S. health care costs continue to rise and, by the year 2000, are expected to reach $1.5 trillion (15 to 17.5 percent of the GNP. Per capita spending on health care will reach $5,515 by the year 2000, compared with $2,425 in 1990 and $1,016 in 1980.     

The ultimate goal? It depends

The knowledge that cervical cancer should be a preventable disease has provided the impetus to improve the Pap smear. Now, for the first time in 50 years, two new computerized technologies are available--the AutoPap and Papnet systems--that could change the way they are interpreted. Of course, these new innovations come at a price, perhaps doubling or tripling the cost--by one estimate, the new technologies could add $1 billion per year. The health policy issue is whether these innovations address the limitations of cervical cancer screening programs in an efficient way. The analysis is entirely different when cast as an individual patient care issue. Here the patient and physician, who serves as her advocate, want to use the best screening method. The goal is not how to best allocate resources to improve the health of the overall population, but instead how to get the best care for the individual patient.     

机构投资者持股与上市公司违规行为的实证研究

本文采用部分可观测的Bivariate Probit估计方法,对2001年至2009年中国1729家上市公司进行回归检验,发现机构投资者持股比例降低了公司违规行为倾向,同时增加了公司违规行为被稽查的可能性。该结论在控制了机构投资者变量内生性的因素后仍旧稳健。进一步研究表明,相比公司经营违规,机构投资者对信息披露违规倾向的影响更强。另外,相比证券机构投资者,养老保险基金、社保基金、企业年金持股的公司中违规公司比例更低。除此以外,机构投资者对公司违规的抑制与检举作用并不受其它公司治理变量的影响。本文的研究表明中国机构投资者在预防与打击上市公司违规行为方面发挥了重要的作用,并且也为上市公司与监管部门提供了治理和防范企业违规的线索。     

A new perspective on quality

The U.S. health care sector consumes nearly 13 percent of our nation's gross national product, $800 billion annually. Our nation allocates the highest amount per capita to health care in the world. Yet many measures of health care outcomes from these expenditures are inferior to other developed nations. The American health care system costs too much, excludes too many, fails too often, contains much excessive and inappropriate care, and knows too little about the effectiveness of the things it does. The purpose of this article is to discuss current payers' perspectives on the potential for quality improvement in the U.S. health care system.     

Reassessing the human health benefits from cleaner air

Recent proposals to further reduce permitted levels of air pollution emissions are supported by high projected values of resulting public health benefits. For example, the Environmental Protection Agency recently estimated that the 1990 Clean Air Act Amendment (CAAA) will produce human health benefits in 2020, from reduced mortality rates, valued at nearly $2 trillion per year, compared to compliance costs of $65 billion ($0.065 trillion). However, while compliance costs can be measured, health benefits are unproved: they depend on a series of uncertain assumptions. Among these are that additional life expectancy gained by a beneficiary (with median age of about 80 years) should be valued at about $80,000 per month; that there is a 100% probability that a positive, linear, no-threshold, causal relation exists between PM(2.5) concentration and mortality risk; and that progress in medicine and disease prevention will not greatly diminish this relationship. We present an alternative uncertainty analysis that assigns a positive probability of error to each assumption. This discrete uncertainty analysis suggests (with probability >90% under plausible alternative assumptions) that the costs of CAAA exceed its benefits. Thus, instead of suggesting to policymakers that CAAA benefits are almost certainly far larger than its costs, we believe that accuracy requires acknowledging that the costs purchase a relatively uncertain, possibly much smaller, benefit. The difference between these contrasting conclusions is driven by different approaches to uncertainty analysis, that is, excluding or including discrete uncertainties about the main assumptions required for nonzero health benefits to exist at all.     

Legal implications of managed care arrangements

Prior to the 1980s, managed care was virtually nonexistent as a force in health care. Presently, 64 percent of employees in America are covered by managed care plans, including health maintenance organizations (20 percent) and preferred provider organizations (44 percent). In contrast, only 29 percent of employees were enrolled in managed care plans in 1988 and only 47 percent in 1991. To date, the primary reason for this incredible growth in managed care has been economic-market pressure to reduce health care costs. For the foreseeable future, political pressures are likely to fuel this growth, as managed care is at the center of President Clinton's national health care plan. Although there are numerous legal issues surrounding managed care, this article focuses primarily on antitrust implications when forming managed care entities. In addition, the corporate practice of medicine doctrine, certain tax issues, and the fraud and abuse laws are discussed.     

Total Economic Consequences of an Influenza Outbreak in the United States

Pandemic influenza represents a serious threat not only to the population of the United States, but also to its economy. In this study, we analyze the total economic consequences of potential influenza outbreaks in the United States for four cases based on the distinctions between disease severity and the presence/absence of vaccinations. The analysis is based on data and parameters on influenza obtained from the Centers for Disease Control and the general literature. A state‐of‐the‐art economic impact modeling approach, computable general equilibrium, is applied to analyze a wide range of potential impacts stemming from the outbreaks. This study examines the economic impacts from changes in medical expenditures and workforce participation, and also takes into consideration different types of avoidance behavior and resilience actions not previously fully studied. Our results indicate that, in the absence of avoidance and resilience effects, a pandemic influenza outbreak could result in a loss in U.S. GDP of $25.4 billion, but that vaccination could reduce the losses to $19.9 billion. When behavioral and resilience factors are taken into account, a pandemic influenza outbreak could result in GDP losses of $45.3 billion without vaccination and $34.4 billion with vaccination. These results indicate the importance of including a broader set of causal factors to achieve more accurate estimates of the total economic impacts of not just pandemic influenza but biothreats in general. The results also highlight a number of actionable items that government policymakers and public health officials can use to help reduce potential economic losses from the outbreaks.     

Medicine and management. Bridging the cultural gaps

Cost-effective health care requires the informed and intensive collaboration of medicine and management. Unfortunately, the two cultures tend to view the health care enterprise very differently. To physicians, the essence is individual physician-patient encounters, patient hospital days, nurse-patient contact hours, diagnoses, and procedures. To managers, the $1 trillion-plus colossus called health care is a challenge to corporate practices of finance, accounting, organization, planning, and personnel. The efforts of these two cultures to face medicine's dilemmas can result in conflict and confrontation--or in collaboration and synthesis.     

Veteran's health care: time for a change?

The Department of Veterans Affairs' mission is "to care for him who are shall have borne the battle for his widow and orphan." The Veterans Health Administration comprises 172 hospitals that are the hub of the health care delivery system. It is the largest provider of graduate medical education, and one of the major research organizations in the United States. The medical care budget exceeds $17 billion annually. Most of the persons cared for are not legally entitled to this health care based on service connected disability. The utilization of acute care hospital beds appears excessive when compared to that obtainable with managed care for Medicare or commercial insurance beneficiaries--the cost per member per month is three times higher. There may also be exploitation of the Veterans Administration hospitals by university medical schools. The Veterans Health Administration is a very expensive way to deliver care to entitled service connected veterans. Therefore, it is suggested that privatization be considered as an alternative vehicle for delivering health care.     

Nursing home care: ensuring quality.

There are more than 17,000 nursing homes in the United States providing care for 1.7 million disabled and elderly individuals. Medicare and Medicaid paid $28 billion in 1997 for nursing home services, more than one half of all nursing home expenditures. Improvements in the quality of care in these facilities and ensuring value for public expenditures has been a long sought after goal. Recent actions by the federal government are designed to strengthen state and federal authority and processes to accomplish this goal. Physician leadership in this area is essential to its success.     

Compliance and ethics programs: competitive advantage through the law

This paper aims to address whether deploying compliance and ethics programs will assist US organizations in implementing the internal mechanisms necessary to achieve a competitive advantage from the law. My focus will be on the US legal system, as the corporate compliance and ethics programs examined are based on mitigation provisions contained in the US Federal Sentencing Guidelines. In particular, I propose that organizations can attain a sustainable competitive advantage from the law by considering the following questions: Do compliance and ethics programs assist organizations in achieving a better understanding of the law? Are compliance and ethics programs a cost-effective approach for coping with an organization’s legal issues? Can compliance and ethics programs aid organizations by preventing these legal issues from occurring in the future? Will compliance and ethics programs support organizations in reframing legal issues as business opportunities?     

Physician financial relationships in the new regulatory environment

In recent months, physicians have been under scrutiny by the federal government with respect to their financial relationships with both drug manufacturers and home care companies. This heightened scrutiny can be attributed, in part, to the attention that has been placed on health care fraud and abuse in this country as a major cause of rising health care costs. Federal investigators currently are examining physician financial relationships in light of the Medicare/Medicaid antikickback statute to determine whether certain payments made to physicians are intended as inducements to refer patients or to prescribe certain products. "Health Law" is a regular feature of Physician Executive contributed by Epstein Becker & Green. Mark Lutes of the law firm's Washington, D.C., offices serves as column editor.     

Will retiree health benefits survive FAS 106?

Recent months have seen dramatic public announcements about retiree health care coverage. General Motors recorded a $24 billion quarterly loss this year, due almost entirely to a one-time charge for future retiree health care costs. Other major employers have also reported sudden staggering losses, along with plans to decrease or stop retiree health coverage entirely. Some of these companies have been taken to court. The headlines also identify a culprit--an obscure accounting requirement, Financial Accounting Standard 106. To understand how an accounting rule can have such a profound effect on both the health care of our seniors and the financial strength of American industry, it is necessary to understand how employers pay for their retirees' care, how new accounting rules governing these costs can threaten a company's survival, and how employers are changing their employees' health coverage to meet these threats.     

Physician career development: toward building a model

Virtually no managed care organization provides a comprehensive and integrated program for physician career development. That's the principal finding of a survey we carried out in Spring 1994 in which we interviewed several individuals who have proven instrumental in the creation of career development programs at their managed care organizations. We started our research with the hypothesis that career development programs for physicians--frequently the most highly paid category of employees and the ones often most directly involved in the delivery of health care--should parallel the mission of the organization. In many of the organizations we surveyed, the mission included clinical excellence, managerial competence, research, teaching, community service, and building shareholder equity. While each organization offered some component of career development--usually clinical improvement and management development--very few offered programs that fostered the continued professional development of physicians in other aspects of their missions. In most cases, even in organizations with stronger career development agendas, the programs were passive and were rarely linked to the overall "corporate" goal of the managed care institution. This critical disconnect makes it extremely difficult for health care organizations to develop a workable system of accountability for their career development programs.     

Effective health care corporate compliance

The pace and intensity of oversight and investigation of health care organizations has greatly increased at all levels. Well run organizations with ethical management committed to following all laws and regulations are still at risk for compliance violations and punitive penalties. Under the Federal Sentencing Guidelines, organizations with an "effective" corporate compliance program may receive reduced penalties. The seven components of an effective program as defined in the guidelines are: (1) Standards and procedures; (2) oversight responsibilities; (3) employee training; (4) monitoring and auditing; (5) reporting systems; (6) enforcement and discipline; and (7) response and prevention. Lack of a compliance program needlessly exposes the organization to an avoidable risk of damage from non-compliance--whether intentional or not. Moreover, an effective program can contribute to the efficient operation of the organization and be a key piece of its corporate culture.     

Board age and corporate financial fraud: An interactionist view

Unlike past studies which have focused on either executives or boards of directors, this study takes an interactionist view to investigate the determinants of corporate financial fraud. We propose that CEOs evaluate the opportunities for financial fraud according to both situational stimuli and their own personal characteristics. As older directors are often more experienced and have more to lose if they fail in their monitoring duties, we expect them to be more capable and to have stronger motivation for monitoring CEOs closely. As such, we propose that a CEO is less likely to engage in corporate financial fraud when the average age of the board of directors increases (i.e., board age). However, when the CEO is older than the board, the CEO may attach less importance to board age when deciding whether to commit fraud. Therefore, we further propose that the CEO–board directional age difference can weaken the effect of board age. Our empirical analyses provide strong support for these hypotheses. Our study contributes to the literature on corporate governance by highlighting the often neglected roles of board age and CEO–board directional age difference in deterring corporate financial fraud.     

Health care fraud and abuse. What physician executives need to know

Fraud and abuse, which can occur in all industries, also exist in the health care industry. This problem is compounded by the reality that "American medicine, although undergoing evolution, now faces changes of a magnitude that has never before been encountered." These changes are creating new realities for physician executives and also new challenges. As there are changes in business practices, there will be changes in how fraud occurs in health care. Physician executives need to be sensitive to the possibility of fraud and abuse as an unwanted component in medical losses in managed care systems.     

Why such a hurry?

Over the past decade or so, federal health policy has chased health care costs that grew out of control largely because of federal intervention in the form of the Medicare/Medicaid programs. Having implemented a prospective pricing system for institutional providers, the government has followed up with a resource-based relative value system for physicians. The prognosis for this new effort may be no better than that for past attacks on health care costs, and the outcome could be substantially worse.