Economic winners and losers after introduction of an effective new therapy depend on the type of payment system.

Published

Journal Article

An effective therapy for a costly illness has economic consequences. There may also be differences between provider costs and payer costs and initial versus long-term costs; costs may also vary with the reimbursement scheme. Consider the case of an effective therapy to prevent restenosis after coronary angioplasty. Assume that the initial provider cost of angioplasty is $12,000 and that restenosis within 6 months results in repeat angioplasty in 20% of cases, with a follow-up cost of $2,400, or $14,400 total. Assume that a therapy costs $1,000 per angioplasty and decreases restenosis by 50%, resulting in repeat angioplasty in 10% of cases. This will result in an initial cost of $13,000 and a follow-up cost of $1,300, or $14,300 total. The total societal costs will be -$100, a slight savings. Thus, the $1,100 cost of therapy is offset by reduced costs associated with restenosis, and the societal costs are almost neutral. Assume that under fee for service providers charge costs plus 10% and that without the new therapy either a package price or a capitated system is revenue neutral. Changes in costs resulting from therapy to prevent restenosis are as follows (plus sign indicates cost or loss; minus sign indicates savings or profit): [table: see text] Under fee for service, the payer takes the risks, and the economic consequences to providers are minimal. The situation is reversed under capitation. For whoever takes the risk, there is an initial loss to pay for the therapy, but a long-term gain due to less restenosis. Under package pricing, the providers lose because of the cost of therapy and fewer procedures, while the payers gain. A new therapy, even if it is revenue neutral to society overall, may have considerable economic consequences, which vary with time and with the different perspectives of providers and payers.

Full Text

Duke Authors

Cited Authors

  • Weintraub, WS; Warner, CD; Mauldin, PD; Becker, ER; Gomes, D; Cook, J; Kosinski, A; Boccuzzi, S

Published Date

  • May 1997

Published In

Volume / Issue

  • 3 / 5

Start / End Page

  • 743 - 749

PubMed ID

  • 10169536

Pubmed Central ID

  • 10169536

International Standard Serial Number (ISSN)

  • 1088-0224

Language

  • eng

Conference Location

  • United States