Oxford Outcomes
HECG - Health Economics Consulting Group
Regulation and Policy Analysis

Oxford Outcomes U.S. Health Economics has broad experience and qualifications in the economic analysis of health care regulations, including hospital rate regulation, certificate-of-need regulations, managed care regulations (e.g., any-willing-provider laws), and regulations affecting other health care providers (e.g., specialty hospitals, physician organizations, clinics, ambulatory surgery centers, etc.). The group has also studied the economic effects of various health reform initiatives, including a recent study of a proposed single-payer health system in California.

Project Examples

  • Legal and Economic Analysis of Health Insurance Exchange Mechanisms
    Health insurance exchange mechanisms are not without tradeoffs and by themselves are far from a perfect means to improve overall health insurance access. We identify five important legal obstacles to the optimal functioning of exchange programs, and we identify an additional nine economic issues that could potentially limit the value and effectiveness of health insurance exchange mechanisms. In terms of legal issues-- even assuming states’ reforms involving risk pools, employer mandates, individual mandates, and exchanges will clear ERISA challenges-- there are a number of other complicated legal issues that should be taken into consideration. These include portability and group versus non-group distinctions (i.e., Section 125, HIPAA, COBRA, and list billing) as well as the adverse selection and cost challenges posed by guaranteed issue and community rating. In addition to these complexities, there are a host of economic issues inherent to mandates and government-administered exchanges, chief among them are concerns over whether exchange mechanisms could improve access appreciably, the fairness of the programs, the costs of the programs, service quality, adaptation, and overall economic impact. Thus, given the dearth of studies of the legal and economic aspects of combinations of mandates and exchanges, it seems clear that more study should be done prior to the consideration of these policies.

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  • The Role of Markets and Competition in Health Care Reform Initiatives to Improve Efficiency and Enhance Access to Care
    There is near unanimous agreement that the lack of universal access to health care services or insurance coverage is one of the principal shortcomings of the U.S. health system, relative to health systems in other high-income developed countries. Lack of universal access generally is believed to be the most significant contributor to the underperformance of the U.S. system in terms of broad population-health measures, such as life-expectancy at birth. A thorough understanding the causes and consequences of uninsurance in the U.S. is required to develop effective health system reforms to ameliorate this shortcoming. Similarly, an appreciation of the strengths and limitations of reforms focused on centralized governmental control or decentralized market coordination as means to improve access is needed to develop consensus on specific reform proposals.
  • Economic Analysis of California’s Proposed Single-Payer Health Plan.
    The primary objective of this report is to review the theory and evidence on centralized health care systems and apply those findings to the specific case of the California Health Insurance Reliability Act (SB 840) and the proposed California Health Insurance System (CHIS). We examine the performance attributes of centralized health plans in general and CHIS in particular, focusing on eight criteria: access, quality, administrative costs, overall health care expenditures, regulatory mechanisms, financing, governance, and transition costs.

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  • The Effects of California’s Proposition 86 on Acute Care Hospitals.
    This paper analyzes aspects of Proposition 86 that affect California’s acute care hospitals, specifically provisions of the bill that call for $756 million in additional hospital subsidies to hospitals for incurred bad debt and uncompensated care (the latter also referred to as “charity care” in the measure) associated primarily with hospitals’ emergency room (ER) and urgent care lines of business. We identify six areas of concern: (1) Proposition 86 will fund all or most bad debt associated with ER-related services provided by hospitals. The intent of the measure is to increase funding of care provided to those most in need, but in practice it will be very difficult to assure such compliance; (2) Proposition 86 relies on a payment mechanism that rewards hospitals with high ER volumes, as total reimbursements under the measure are directly a function of total ER volume (without regard to mix of insured versus uninsured or low versus high income, etc.). The measure does not provide mechanisms to monitor the extent to which ER volume increases are warranted, necessary, or beneficial; (3) Proposition 86 provides strong financial incentives to hospitals to continue to charge very high prices to uninsured patients above 350% FPL, because doing so will maximize their “uncompensated care” losses that are a factor in establishing payments under Proposition 86; (4) Proposition 86 would supersede many of the desirable attributes of AB 774. In general, AB 774 is more consumer-oriented by allowing hospitals more flexibility in granting charity care eligibility to individuals with incomes exceeding 350% FPL and giving patients more flexibility in establishing financial need; (5) Proposition 86 employs weak controls on how hospitals can spend bad debt subsidies. The measure uses a broad definition of allowable expenses, and hospitals are likely to behave opportunistically by exploring the boundaries of those limits; and (6) Proposition 86 will over-fund hospitals’ uncompensated care by as much as 75% when existing subsidies, such as non-profit tax exemptions, are taken into account.

  • Economic and Policy Analysis of Specialty Hospitals.
    Hospital specialization has become a controversial topic in recent years, culminating in a moratorium issued in 2003 by Congress directing the Centers for Medicare and Medicaid Services to cease payments to new physician-owned specialty hospitals for those Medicare and Medicaid patients referred by physicians with a financial interest in the facility. The moratorium was in part a response to concern among incumbent general hospitals that specialized facilities harm the community by undermining the ability of general hospitals to internally cross-subsidize unprofitable services. This project focuses on one important economic question which continually arose during these debates: does the presence of specialty hospitals in a market reduce general hospitals’ operating margins?

    We estimate longitudinal panel regression models for the seven-year time period 1997 to 2003. The first set of models assumes exogenous entry; that is, the establishment of a new specialty hospital is assumed to be uncorrelated with the profit margins of extant general hospitals in the same market. We model exogenous entry with random hospital effects and fixed hospital effects. The second set of models assumes endogenous entry; that is, the establishment of a new specialty hospital is assumed to be correlated with the profit margins of extant general hospitals in the same market.

    The results were somewhat surprising. In all models, the presence of one or more specialty hospitals in the market was associated with higher general hospital profit margins. Our findings raise questions about the contention that specialty hospitals harm the ability of general hospitals to provide indigent care.
  • Analysis of the Effects of Budget Changes on the Performance of California’s Area Agencies on Aging.
    Area Agencies on Aging are critical components in the delivery of health care services to the elderly. This project assessed the effects of a significant state-level budgetary increase for these agencies. We found that small budget changes resulted in significant improvements in the ability of the agencies to fund certain programs.


Cost and Outcome Analysis
Market and Business Analysis
Regulation and Policy Analysis