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Does Case Management Matter as a Hospital Cost–Control Strategy? Kenneth R. White Gloria J. Bazzoli Susan D. Roggenkamp Tao Gu Abstract: Using an evidence-based model for management research, we examine the relationship of case management adoption and the expected nonclinical outcomes in nationwide hospitals operating continuously between 1994 and 2000. Although case management may be beneficial for certain populations, institution-wide effects in the form of decreased costs or decreased length of stay do not appear to be present in the study hospitals.
T
he search for successful strategies to contain hospital costs, while improving quality and outcomes, has intensified to keep pace with economic pressures from government and private insurers. Strategies to control hospital costs have included reengineering,1 addition or deletion of programs and services,2 reductions in personnel,3 performance improvement,4 outsourcing services,5 or modifying staffing decisions to improve productivity.6 In the late 1980s, case management was introduced as an innovative strat-
Key words: cost control, hospital case management, length of stay
Kenneth R. White, PhD, FACHE, Associate Professor and Director, Graduate Program in Health Administration, Virginia Commonwealth University, Richmond. E-mail:
[email protected]. Gloria J. Bazzoli, PhD, Department of Health Administration, Virginia Commonwealth University, Richmond. Susan D. Roggenkamp, PhD, Health Care Management Program, Department of Management, Appalachian State University, Boone, North Carolina. Tao Gu, MHA, Virginia Commonwealth University, Richmond. Health Care Manage Rev, 2005, 30(1), 32-43 A 2005 Lippincott Williams & Wilkins, Inc.
egy that promised to control costs by streamlining inpatient production processes,7 thereby reducing lengths of stay in acute care hospitals with the consequent reduction in consumption of costly inpatient resources. Qualitative enhancements attributed to case management include improving the quality of care and increasing both staff and patient satisfaction.7–9 Adoption of the practice has proliferated throughout the US hospital industry, from only 50 hospitals in 198710 and growing to 71 percent of U.S. hospitals by 2000.11 Due to the paucity of evidence-based management research regarding the control of hospital costs,2 it is uncertain which types of cost–control strategies are most effective in achieving highest value. Likewise, due to limitations in current research the extent to which case management programs are responsible for controlling costs across groups of hospitals is unknown.12–15 As Finkler and Ward2 describe, decision making based on empiric evidence may occur at the level of the individual hospital or may be based on ‘‘broader evidence by researchers from a wide number of hospitals’’ (p. 348). Although there are many reports of the predicted effects of inpatient case management for individual hospitals, there are few research studies that address whether inpatient case management programs have achieved the desired outcome of controlling costs across the hospital industry. This paper begins to fill the gap in research by answering these questions:
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Does Case Management Matter as a Hospital Cost–Control Strategy?
Do hospitals experience overall reductions in lengths of stay or expenses per admission following the adoption of case management? Does the effect of case management adoption on lengths of stay or expenses per admission vary according to certain hospital characteristics?
This study advances knowledge of hospital management practices because it evaluates, across the hospital industry, the relationship of case management adoption and the expected nonclinical outcomes of the practice.
BACKGROUND CASE MANAGEMENT Case management is an organizational approach to care delivery that historically was used in community settings. Community-based case management focused on the structure, process, and outcomes of care provided to frail elderly and persons with a mental illness with the overall intent to maintain these populations in home settings. In 1985, the New England Medical Center implemented the first acute care case management program, in response to Medicare’s prospective payment system and in anticipation that fewer resources would be available to provide equal or more extensive levels of care.16 Hospital case management is designed to maintain or improve quality of care by ensuring that the production processes for inpatient care are streamlined, with a case manager that coordinates care between providers, departments, and along the continuum of care. The case manager understands the patient’s clinical course and is accountable throughout the hospitalization for the clinical and financial outcomes of care. A commonly accepted definition of case management is ‘‘A collaborative process that assesses, plans, implements, coordinates, monitors, and evaluates the options and services required to meet an individual’s health needs, using communication and available resources to promote quality and cost-effective outcomes’’.17 Commencing in 1994 the American Hospital Association, in its Annual Survey of Hospitals,18 defines hospital case management as ‘‘a system of assessment, treatment, planning, referral, and follow-up that ensures the provision of comprehensive and continuous services and the coordination for payment and reimbursement for care.’’ Although occasionally a social work function, case management has long been an implicit activity of nurses and has even been described as the nursing process applied at a system level.19 Case management
has become a formalized specialty in the nursing profession, complete with professional associations, formal educational programs, and a body of professional standards.
EXPECTED OUTCOMES OF HOSPITAL CASE MANAGEMENT ADOPTION Studies have shown that case management decreases cost and improves quality,20 although the majority of the reports are descriptive rather than evidence based.7,21 Cook7 analyzed eighteen research studies prior to 1995 that measured inpatient case management and outcomes such as patient satisfaction, provider satisfaction, quality, costs, and length of stay. Although the measures varied and outcomes were mixed, several of the studies showed positive correlations between case management and the outcomes.7 More recent studies have measured quantitative impacts of case management such as reduction in payer denials,22 decreased length of stay,13 critical care utilization, and mortality in patients with coronary artery bypass graft,23 decreased average length of stay for specific physicians,24 and decreased cost and limited readmissions.24 In a qualitative study, Griffith and White25 describe hospital case management as an important component in managing resources of selected high-risk, high-cost inpatient populations in an integrated delivery system with increased patient satisfaction and quality of life scores, although cost savings were difficult to measure. Most studies that describe the benefits of case management define economic benefit as shortened lengths of stay due to the implementation of critical pathways.13,14 Most research on the effectiveness of hospital case management tends to be focused on population-specific studies,23,26,27 the use of critical pathways, and selected diagnoses.14,28–30 The results of published studies examining outcomes of case management for individual organizations or for selected patient populations are rich in anecdotal evidence, although large-scale studies across the hospital industry regarding the effectiveness of hospital case management in reducing organizational costs are lacking. A central assumption of the impact of case management on overall hospital performance rests in the presumed relationship of length of stay and costs. The long-held (and admittedly often valid) truism is that by reducing lengths of stay hospitals will experience better control of total costs. However, such a relationship is not always the reality. For example, the administrative costs of a case management program may offset any cost savings resulting from decreased lengths of stay; however, the literature virtually is silent regarding the
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fully allocated costs* of case management. For certain chronic diseases and conditions that result in frequent readmissions, hospitals may be incurring financial losses with each emergency department visit or hospitalization, regardless of the length of stay because some insurance plans do not cover expenses for readmission within 30 days. Hospitals that can intensify the delivery of high-technology (i.e., high-cost) services into shorter lengths of stay may actually demonstrate higher costs than lower technology hospitals that have longer lengths of stay. Thus, case management based in acute care organizations may be instrumental in managing the inpatient course of patients with complex care needs and reducing lengths of stay but may not be entirely effective at reducing overall hospital costs. Some researchers have reported discrepant results regarding the effectiveness and efficiency of hospital case management, such as increased variable costs;31 increased volumes without increases in revenue, increased numbers of full-time employees;32 no reduction in lengths of stay in a case-controlled study;14 and no impact on postacute service utilization or patient satisfaction with length of stay improvements noted only for high-risk patients.33 Further, in a panel study of hospital adoption of case management from 1994 to 2000, Roggenkamp et al.12 considered possible motivations of hospitals to adopt case management by evaluating various precedent organizational and market factors. This research indicates that institutional (isomorphic) factors, such as system membership and prior case management adoption by competitor hospitals in the local market were prevalent in addition to higher costs per admission, relative to competitors. Other economic factors that might indicate the need for cost– control strategies (longer lengths of stay and greater managed care penetration) were not associated strongly with subsequent case management adoption. There is new interest in applying evidence-based decision making to health care management research, such as cost–control strategies.2,34,35 Finkler and Ward2 propose that strategic cost containment requires the use of evidence to measure costs accurately, to assess the effectiveness of cost–control measures, and to assess the impact of cost reduction strategies on quality or outcomes. This study evaluates whether hospital case management is effective as a cost–control strategy with
*See Griffith and White (Ref.25,p.111) for a description of one system’s estimated annual operating costs of a disease-specific case management program including such costs as labor, training and development, licensure of certain technologies, etc. Also, Finkler and Ward2 discuss the use of activity based costing rather than traditional methods of cost allocation; certainly few, if any, studies consider this approach in determining costs of implementing case management activities.
respect to the two outcomes traditionally claimed as benefits of its adoption: reduced inpatient average lengths of stay and reduced expenses per adjusted admission. If hospital case management is effective as a cost management strategy, we expect to find improvements in these outcomes, all other factors held equal. We use a first difference approach to investigate differences in outcomes from 1994 to 2000 from two perspectives: whether or not the hospital adopted case management and the number of years during that period that the hospital reported having case management. We also test the models with respect to certain hospital characteristics namely, bed size, Medicare case mix index, and hospital ownership in order to discover if case management achieves different outcomes according to hospital organizational characteristics.
DATA AND METHODS A variety of data sources were brought together to examine the effects of hospital case management on length of stay and expenses per adjusted admission. The primary data source was the American Hospital Association (AHA) Annual Survey data, which provided information on hospital involvement in case management programs, hospital expenses, adjusted admissions, average length of stay, and a variety of organizational characteristics relevant to the study. AHA data were merged with Center for Medicare & Medicaid Services data on Medicare hospital case mix. In addition, we merged these data with the Area Resource File, which contains information on community health resources and sociodemographics, and with the InterStudy data on health maintenance organizations (HMOs), which report HMO enrollment across the US corrected for home office reporting problems.y Using the AHA data, we identified all nonfederal, short-term acute care hospitals that did not report having case management in 1994. We selected hospitals without case management in this year so that we could assess whether the subsequent adoption of case management resulted in a reduction in expenses per admission or average length of stay relative to the 1994 base year. The AHA first introduced a question about hospital provision of case management services in 1994, and the same question was used consistently for all years in our study period, namely, from 1995 through 2000. In addition to measuring whether a hospital adopted case management some time between 1995 and 2000, we also measured the number of years that
y
These data and approaches for dealing with the home office reporting problem are discussed in Wholey et al.36
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a hospital reported having case management during this period so we could assess whether its effects materialized over time as hospitals gained experience with the practice. The two dependent variables in our analysis are hospital average length of patient stay and expenses per adjusted admission. In order to isolate the effects of case management on these measures, we conducted a first-difference multivariate regression analysis in which the dependent variables are measured as changes in value between the base year of 1994 and the year 2000. In this way we can contrast expense growth and length of stay changes between hospitals that had no or little experience with case management between 1995 and 2000 and those that had the practice and experience with it. The first-difference approach implies that the explanatory variables in the model generally are also measured as changes from 1994 to 2000. Some variables, however, experience little to no change and thus are measured as 1994 base year values as will be noted below. In terms of our expense analysis, many research studies have examined factors affecting hospital expenses and our empirical model draws on this prior research.37–43 Consistent with economic theory, our model has hospital expenses per adjusted admission as a function of a variety of hospital outputs, input prices, and case mix. These variables are interacted and output measures are also entered as squared values to accommodate the functional form of a standard structural cost function. In addition, following Granneman et al.,40 the model includes a variety of hospital and market characteristics that are likely to affect the level of costs but not the relationships between costs and outputs, input prices, and case mix. More specifically, for the expense analysis, we included three measures of hospital outputs as explanatory variables: inpatient days, hospital admissions, and outpatient visits. These data all come from the AHA Annual Survey of hospitals and were all measured in log terms. Input prices were measured by the area wage index and the Medicare case mix index, both of which are available through the Center for Medicare & Medicaid Services. These are also measured in logs and, in addition to direct effects, are entered as interactions with the various hospital outputs, which allows them to influence the marginal costs of various hospital outputs. The model also included hospital control variables, all of which were derived from AHA Annual Survey data. Specifically, we included measures of payer mix (the percent of inpatient days that are Medicare and the percent of inpatient days that are Medicaid) and the number of tertiary services and postacute care services offered by the hospital. All of the variables noted above were measured as differences between 1994 and 2000. We also included three hospi-
tal control variables measured strictly in the base year of 1994 because they exhibit limited change and we expected them to affect hospital expenses and potentially its changes over time. These were hospital staffed and set-up beds, ownership category (measured as public, church-affiliated, and for-profit with other nonprofit omitted), and hospital teaching status based on whether the hospital was a member of the Association of American Medical Colleges’ Council of Teaching Hospitals. The empirical model for hospital expenses per adjusted admission also included measures for market characteristics derived from aggregated AHA data, the Area Resource File, or InterStudy HMO data. As with most of measures discussed above, these were measured as 1994–2000 differences. All market variables, with the exception of the HMO measure, were constructed using the county as the relevant market. The InterStudy measure of HMO market share is only available for Metropolitan Statistical Areas. Hospital market characteristics included in the study were as follows: total population (measured in 10,000s); hospital market competition measured based on the Hirschman– Herfindhal Index (HHI), which was calculated using a hospital’s share of inpatient days; the number of hospital beds per 1000 population in the county; the percent of office-based physicians in primary care; percent of the population over age 65; percent of the population who reported having race of ‘‘black’’; percent of the population who reported having ethnicity of ‘‘Hispanic’’; and per capita income in the community. These various factors could affect the demand for hospital services. In addition, HMO market share and competition as reflected in the HHI may motivate hospitals to be more efficient. Our second dependent variable of interest is average hospital length of stay, which we computed from AHA data and equaled the number of hospital inpatient days divided by the number of inpatient admissions. Unlike analysis of hospital costs, there is very little published research examining the factors that influence hospital average length of stay.44 Given this, we used a similar specification to the one used in our hospital expense analysis. However, we eliminated all the variables that are unique to an economic specification of a cost function, namely, the interactions of outputs, input prices, and case mix, and the squared output terms. We included two additional variables that we thought relevant to explaining average length of stay: the base year Medicare case mix index for 1994 and the change in the number of nursing beds per 1000 population in the county between 1994 and 2000. Hospitals with high base year case-mix treat more complex patients that require longer lengths of stay. Nursing home availability, on the other hand, influences a hospital’s ability to
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transfer patients to lower levels of care once their acute care needs are addressed. Overall, our analysis focused on 2674 nonfederal, short-term general hospitals that lacked case management in 1994 but may have adopted it subsequently and that were in continuous operation through 2000. These hospitals were located in rural and urban communities throughout the 50 states and the District of Columbia. In total, 1582 (59.2 percent) adopted case management some time between 1995 and 2000 and 961 of these adopters (60.7 percent) reported having case management for three or more years. Table 1 provides selected descriptive data on these hospitals classified based on whether they adopted case management between 1995 and 2000 and whether they reported having it for three or more years. Table 2 provides descriptive data on the variables included in our multivariate analysis. As noted throughout this section, we used a firstdifferences regression analysis framework in order to isolate the impact of case management adoption on hospital expenses per adjusted admission and average length of stay. This framework has the advantage of controlling for time invariant unmeasured hospital and
market characteristics that may affect hospital decisions about adopting case management or that may affect the dependent variables of interest. This method also allowed us to assess the effects of the number of years a hospital reported case management on the outcome variables of interest, capturing the potentially cumulative impact of case management experience on hospital expenses per adjusted admission and average length of stay. We conducted our first difference analysis initially for all study hospitals combined. Then we segmented hospitals into distinct subgroups to see if case management adoption had differential effects for specific types of hospitals. Specifically, we segmented hospitals according to three different factors: (1) number of staffed and set up beds; (2) Medicare case mix; and (3) hospital ownership. Regarding bed size, we expected that case management would have the greatest value for large hospitals because they had greater need to manage care if they were going to use their capacity effectively. Hospitals with high Medicare case mix, on the other hand, treated more complex patients, which would necessitate closer management to ensure patients received the full array of treatments needed at the
T ABLE 1
1994 Hospital Characteristics by Case Management Adoption Patterns 1995–2000
Ownership status (%) Public Church affiliated Other nonprofit For profit System affiliation (%) System member Not system member Teaching status (%) COTH member Non-COTH Bed size (average number of staffed and set-up) Tertiary services offered (average number) Hospital Medicare case mix (average) Community type/size (%) Rural Urban, pop .10. a
All first difference regression results summarized in this table were derived from models that included all the variables noted in Table 4.
contend with prospective payment and decreased financial resources, it was widely adopted in a span of a decade without much research on its cost or widespread effectiveness. Anecdotal reports and organization-specific research studies show that case management has a positive effect on the care of individual and classes of patients, measured by desired outcomes and customer satisfaction, and increases in provider satisfaction. However, institution-wide effects in the form of decreased costs or decreased length of stay do not appear to be present given the results of our analysis. Our findings are robust in that we found a lack of significant institution-wide decreases in cost and length of stay for hospitals overall and for distinct subgroups of hospitals, after controlling for size, Medicare case mix, number of tertiary services, outputs and input price measures, and other hospital and market characteristics that have been associated with length of stay and hospital inpatient costs. As such, our research suggests that case management may not be a useful tool for improving a hospital’s overall competitive position with respect to cost or efficiency. Granted, our measures of outcomes are broad, but they are the usual metrics for assessing a hospital’s overall inpatient performance. Also, we note that our findings are consistent with previous research that suggests case management is likely adopted from institutional isomorphic influences. It is important to note that our study does not evaluate quality improve-
ments and increased patient and staff satisfaction that may be achieved with case management. Further, given the results of some existing studies, it is clear that case management may be a useful tool for improving quantitative outcomes for specific groups of patients. Even in the absence of overall institution-wide cost improvements, these qualitative factors may be overriding considerations for the adoption or continuation of case management practices.
LIMITATIONS There are several limitations to this study. First, what has been implemented in the name of case management is not always clear16 and the definition of case management may differ across organizations that responded to the AHA survey. A comprehensive, integrated hospital and community-based case management program may be quite different than the implementation of a few clinical pathways for inpatients with specific high-cost or highrisk diagnoses. Our research design is not sensitive enough to describe the extent to which case management programs are comprehensive or limited. Second, it may be that a case management program may need to be in place for a long time so that it can organize and develop before achieving desired outcomes. We were limited to looking at case management adoption in a relatively short period of time (1995– 2000) given the analytical framework adopted and
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the fact that 1994 is the first year that AHA included this question in the Annual Survey. Some of the case management programs captured by our measures are thus relatively new and may not have had the chance to affect a hospital’s overall cost structure and care processes. Third, in order to evaluate case management as a cost–control strategy, it would be useful to know the actual costs of case management. Following the framework for conducting evidence-based management research by Finkler and Ward,2 measuring costs accurately is a precursor to implementing cost–control strategies. After implementation of cost–control strategies, the next step would be the assessment of value and how the cost–control strategy added value to the organization and society. We know that case management is a common practice, but due to the paucity of research, we do not know the extent that case management is a best practice compared to other cost– control strategies.
FUTURE RESEARCH Following the framework for conducting evidence-based management research by Finkler and Ward,2 it is proposed that research be conducted in three areas relative to case management. First, studies are needed to measure costs of case management. What are the administrative costs before and after implementation of case management? How do any cost savings from case management compare to these added costs? Assessing total direct and indirect costs of the case management function pre- and postimplementation would add depth to understanding the true ‘cost savings’ attributable to case management. Also, studying the costs of the case management function over time may reveal that more experience with the process yields better efficiency, mitigating any offset to cost savings. Second, large-scale studies are needed to assess case management as a cost–control strategy across the hospital industry. Were the desired financial or economic goals and outcomes achieved? Are some case management models more effective than others in achieving the desired cost savings? For which populations of patients is case management most effective? Are some organizations better able to control costs with case management than others? Third, the value of inpatient case management to the organization and to society must be assessed. Do some case management programs produce higher quality outcomes than do others? Are outcomes better in case-controlled studies? Were there any unintended outcomes to patients, providers, society? What are the trade-offs between cost and quality? To conduct this research, a typology of various approaches to inpatient case management programs
must be developed. Then through primary data collection, researchers could assess relative performance of various models of hospital case management and the factors contributing to the degree of success each hospital reports. This inquiry may best be accomplished through inductive research leading to deductive data analysis. Through qualitative research investigators could first assess thoroughly the characteristics, likely organizational correlates and outcomes (both costs and quality measures) for each form of case management in the typology. Such qualitative data would be collected for a small sample, perhaps two or three settings for each type of case management. The findings of the qualitative investigation then form the hypotheses for a valid objective primary data collection effort across the hospital industry. To measure definitively the contribution of case management to hospital operations, this suggested research should lead to an evidence-based approach that assesses costs and outcomes for multiple organizations. Current knowledge regarding the outcomes of case management is limited because the majority of hospital case management research is based on individual hospital experiences and certain patient populations. This study demonstrates the importance and necessity of evidence-based management research in assessing management problems and issues of hospital cost and utilization.
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