Geographic variations in Medicare utilization of short-stay hospital services, 1981-88

Health Care Financing Review, Spring, 1990 by Winston O. Edwards, David A. Gibson

Geographic variations in Medicare utilization of short-stay hospital services, 1981-88

Data sources and limitations

The Health Care Financing Administration (HCFA) maintains extensive data associated with the utilization of inpatient hospital services covered by the Medicare Part A (hospital insurance) program. These data include:

* Bills that are submitted by hospitals to fiscal intermediaries and are processed and forwarded to HCFA's central office.

* Stay records that are prepared in the central office, using bills, costs reports, and other data sources.

* Hospital cost reports.

The various data sources are used for a variety of program management and evaluation initiatives. The data presented in this article are abstracted from Medicare short-stay hospital inpatient discharge bills submitted through July 1989.

Several caveats need to be considered when one is using Medicare administrative data to draw inferences about utilization:

Completion of the data files--For a stay to be covered and reimbursed by the program, it is not imperative that a bill record ultimately come into the central office. Although HCFA makes considerable effort to ensure that bill records prepared by our fiscal agents are forwarded to HCFA's central record system, evidence exists that records are not always sent. The problem of missing data obviously affects conclusions about trends and geographical variation. Two program and administrative initiatives begun during the time covered in this article also affect the completion of the data files. The first is the introduction of the prospective payment system (PPS) for short-stay hospitals beginning with provider fiscal year 1984 (starting October 1, 1983). This new payment mechanism changed the incentives for utilization of services. As with any new procedure or process, some fiscal intermediaries had difficulty sending in bill records correctly. However, we believe the level of nonreporting for 1984 is relatively small. A second initiative was the introduction of a new bill record format. Lagging slightly behind the implementation of PPS, HCFA introduced a new bill record format designed to contain all the information mandated by the new institutional billing form--the Uniform Bill (UB-82 OR HCFA 1450). The new billing record format (UNIBILL) replaced the older patient billing (PATBILL) record format. Some fiscal intermediaries experienced reporting problems when converting their systems. The system conversion during fiscal year 1985 resulted in incomplete submission of discharge bills to HCFA. Therefore, we have made adjustments to reflect a more accurate estimate of total Medicare discharges for that year based on admission notices sent separately from discharge bills for the year.

Use of discharge bills--Utilization estimates based on discharge bills instead of stay records--for example, the Medicare provider analysis and review (MEDPAR) stay record file--may differ because of different methods of grouping data. For example, those stays that span a hospital's transition into PPS may result in two separate discharge bills, one created for the cost-based portion of the stay and one for the PPS-reimbursed portion of the stay. This tends to artificially reduce the average length of stay slightly and increase discharge rates. However, neither total number of days of care nor rates per 1,000 enrollees are affected.

Measures of utilization--Estimates prepared for this article may differ from other reports because definitions of utilization measures may vary. For example, both covered and noncovered (by Medicare) stays are included. In addition, both covered and noncovered days are used.

Changes in classification of providers--With the introduction of PPS in fiscal year 1984, a number of Medicare short-stay hospitals were reclassified as nonshort-stay hospitals. For example, psychiatric, rehabilitation, pediatric, and alcohol/drug short-stay hospitals were reassigned nonshort-stay provider numbers, primarily for payment purposes. Bills for hospitals with nonshort-stay provider numbers are not included in the trends shown. In addition, some hospitals with nonshort-stay numbers, or which had been reassigned nonshort-stay numbers, were later reclassified as short-stay (for example, alcohol/drug hospitals).

Geographic area covered--Only providers in the United States (50 States and the District of Columbia) are covered; discharge bills for providers in the outlying territories (Puerto Rico, Virgin Islands, American Samoa, and Guam) are excluded.

Growth in health maintenance organizations--Since the passage of the Tax Equity and Fiscal Responsibility Act (TEFRA), the number of persons enrolled in health maintenance organizations (HMOs) has grown rapidly; more than 1 million persons are now covered by TEFRA risk HMOs. HCFA does not always receive discharge bills in cases in which an HMO has the responsibility for payment. To the extent that such no-payment bills are missing from the data, the trends are affected. It is known that risk HMO enrollees are not uniformly spread across the United States. Therefore, the geographic distribution is affected as well.