Compared with other preventive interventions, smoking cessation is extremely cost-effective. The more intensive the intervention, the lower the cost per QALY saved, which suggests that greater spending on interventions yields more net benefit. While all these clinically delivered interventions seem a reasonable societal investment, those involving more intensive counseling and the nicotine patch as adjuvant therapy are particularly meritorious.

Medicaid requires that physicians who accept Medicaid reimbursement for treating a patient agree to accept its payment as payment in full. Policy instruments under Medicaid's control are both levels of reimbursement and various administrative burdens imposed on physicians by the program. A model depicting the physician's participation decision is developed, and predictions from the comparative statics analysis are discussed. Data came from a 1975--76 survey of fee-for-service physicians. The results indicate that high fee schedules and low administrative burdens are ways to stimulate physician involvement with Medicaid patients. Results on the Medicaid policy instruments and other explanatory variables on the whole lend support to the model of physician behavior proposed earlier in the paper.

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In this paper we compare physician referral patterns, quality, patient satisfaction, and community benefits of physician-owned specialty versus peer competitor hospitals. Our results are based on evidence gathered from site visits to six markets, 2003 Medicare claims, patient focus groups, and Internal Revenue Service data. Although physicianowners are more likely than others to refer to their own facilities and treat a healthier population, there are rationales for these patterns aside from motives for profit. Specialty hospitals provide generally high-quality care to satisfied patients. Uncompensated care plus specialty hospitals' taxes represent a greater burden, in percentage terms, than community benefits provided by nonprofit providers. [Health Affairs 25, no. 1 (2006): 106-118] A s pa rt o f t h e m e d i c a r e p r e s c r i p t i o n d ru g, Improvement, and Modernization Act (MMA) of 2003, Congress established an eighteenmonth moratorium on the development and expansion of new physicianowned specialty hospitals. The central concern among policymakers is whether these hospitals enjoy an unfair competitive advantage relative to other community hospitals. During the moratorium, Congress required the Medicare Payment Advisory Commission (MedPAC) and the Centers for Medicare and Medicaid Services (CMS) to report on two different aspects of this issue. At issue is whether specialty hospitals' physician-owners are able to control the referral of patients, choosing between their own facilities and other hospitals in the community, in a way that results in favorable selection. Other related issues are whether specialty hospitals provide high-quality care, how their patients perceive care, and what types of community benefits they contribute in their markets. Although the con-1 0 6 J a n u a r y / F e b r u a r y 2 0 0 6

This book provides a balanced assessment of pay for performance (P4P), addressing both its promise and its shortcomings. P4P programs have become widespread in health care in just the past decade and have generated a great deal of enthusiasm in health policy circles and among legislators, despite limited evidence of their effectiveness. On a positive note, this movement has developed and tested many new types of health care payment systems and has stimulated much new thinking about how to improve quality of care and reduce the costs of health care. The current interest in P4P echoes earlier enthusiasms in health policy—such as those for capitation and managed care in the 1990s—that failed to live up to their early promise. The fate of P4P is not yet certain, but we can learn a number of lessons from experiences with P4P to date, and ways to improve the designs of P4P programs are becoming apparent. We anticipate that a “second generation” of P4P programs can now be developed that can have greater impact and be better integrated with other interventions to improve the quality of care and reduce costs.