Providers with lower costs may be more efficient and, therefore, provide better care than those with higher costs. However, the relationship between risk-adjusted costs (often described as efficiency) and quality is not well understood. We examined the relationship between hospitals' risk-adjusted costs and their structural characteristics, nursing levels, quality of care, and outcomes. U.S. hospitals with low risk-adjusted costs were more likely to be for-profit, treat more Medicare patients, and employ fewer nurses. They provided modestly worse care for acute myocardial infarction and congestive heart failure but had comparable rates of risk-adjusted mortality. We found no evidence that low-cost providers provide better care.

Patients who received lower extremity prostheses had comparable Medicare episode payments ($6,099 per-member-per-month for study group, $6,015 per-member-per-month for comparison group) and better outcomes than patients who did not receive prostheses. Study group patients were more likely to receive extensive outpatient therapy than comparison group patients (p < 0.05). Receiving physical therapy is associated with fewer hospitalizations and emergency room visits, and less facility-based care (p < 0.05), essentially offsetting the cost of the prosthetic over a 12-month time frame.

Large-scale health care quality improvement is feasible, when broadly supported by statewide leadership and community infrastructure. Practice-collected data and lack of a control group are limitations of the study design. Future priorities include maintaining improved sustainability for practices and communities. Our long-term goal is to transform all 2000 primary-care practices in our state.

Hospital cost shifting is alive and well, but its premature demise could have negative effects on all hospital patients.by Allen Dobson, Joan DaVanzo, and Namrata Sen ABSTRACT: The cost-shift payment "hydraulic" is an integral component of the fragmented U.S. health care financing system. If private payers' acceptance of the cost-shifting burden were to erode, our system of health care financing could become unstable. This is especially true for the hospital industry. In this paper we provide a series of examples of cost shifting and a historical profile of the cost shift in the hospital industry since 1980, noting that cost-shifting pressures seem to fluctuate over time and across health care markets. Cost shifting need not be dollar per dollar, as hospitals can absorb some degree of costshifting pressure through increased efficiency and decreases in service provision. [Health Affairs 25, no. 1 (2006): 22-33] D u r i n g t h e pa s t t w e n t y y e a r s , documentation of hospital cost shifting has accumulated in the health services research literature; at the same time, some economists have maintained that cost shifting either does not exist or is "dead." Several researchers have defined the cost shift and described the history of the debate in both conceptual and empirical terms. 1Those who advocate for the existence of cost shifting point to differential hospital payment-to-cost ratios across payers and to increased premiums paid by private-sector payers at the same time public payers receive rate reductions.2 In 1992 the Prospective Payment Assessment Commission (ProPAC) estimated that privately insured patients were being charged, on average, 28 percent more than costs.3 Those who argue against the existence of cost shifting cite profit maximization, selective contracting, and price competition as precluding hospitals from shifting costs, maintaining an "impossibility theorem" associated with classical economic theory. 4 They posit that firms aim to maximize profits and that, as such, hospitals would charge private payers the highest price permitted by the market. 5Selective contracting by managed care plans meant that hospitals began to compete on price, which further hindered their ability to raise prices to selected pay-2 2 J a n u a r y / F e b r u a r y 2 0 0 6 M i s s i o n V s . M a r k e t

Estimates of graduate medical education, research, and standby capacity show that the greater costs of academic health center hospitals are likely justified.by Lane Koenig, Allen Dobson, Silver Ho, Jonathan M. Siegel, David Blumenthal, and Joel S. Weissman ABSTRACT: Academic health centers and other teaching hospitals face higher patient care costs than nonteaching community hospitals face, because of their missions of graduate medical education (GME), biomedical research, and the maintenance of standby capacity for medically complex patients. We estimate that total mission-related costs were $27 billion in 2002 for all teaching hospitals, with GME (including indirect and direct GME) and standby capacity accounting for roughly 60 and 35 percent of these costs, respectively. To assure their continued ability to perform important social missions in a competitive environment, it may be necessary to reassess the way in which these activities are financed.T h e h i g h c o s t o f ac a d e m i c h e a lt h c e n t e r s (AHCs) and other teaching hospitals has been attributed to the unique missions these institutions pursue-including graduate medical education (GME), biomedical research, and the maintenance of standby capacity for highly specialized patient care.1 Although the value of these missions is generally recognized, there is ongoing debate over the extent to which they add to the cost of patient care and the proper mechanisms for paying for these costs.2 Medicare is often viewed as the primary payer of GME, because of its size and its use of explicit payment adjustments for teaching hospitals. Private payers also contribute through higher negotiated rates, although these implicit subsidies are vulnerable in competitive markets.