Improving Treatment for Drug-Exposed Infants
Treatment Improvement Protocol (TIP) Series 5

Background

Determining the cost of providing treatment to drug-exposed infants is perhaps as complicated as the treatment itself. With an infinite variety of clinical, financial, and data collection issues involved, it would be futile to attempt to attach monetary values to the many services, procedures, and tests necessary to provide care to this ever-increasing segment of the population. Prior attempts by various researchers to estimate costs, both on the national and patient levels, are only rough estimates. Consequently, the following discussion focuses on the issues involved in making cost estimates, mainly by recognizing that provider charges, or pricing, bear a direct relationship to cost.

Specifically, the most intensive component of the cost of treatment is the inpatient setting. It is this treatment phase for drug-exposed infants that is emphasized here. The purpose of this information is to provide guidance to State alcohol and drug abuse directors, treatment program directors, facility financial personnel, and neonatal intensive care unit (NICU) department chiefs for developing procedures dealing with pricing, cost finding, and budgeting. Included is the following information:

• An overview of factors influencing provider pricing;
• Strategies in evaluating provider charges and costs for the treatment of drug-exposed infants;
• A listing of the most frequent services, procedures, and tests utilized in providing neonatal treatment to drug-exposed infants; and
• Sample ranges of charges obtained from hospitals that provide Level II and III NICU treatment for drug-exposed infants.

An in-depth analysis of the medical management of the drug-exposed infant, as prescribed by the consensus panel, has resulted in a breakdown of treatment into three areas:

• Evaluation and management services
• Clinical procedures
• Pathology and laboratory tests.

These areas of treatment are further delineated into individual services, procedures, and tests as defined by the American Medical Association's Current Procedural Terminology (CPT). For each item, CPT-4 codes are supplied to assist with planning for the utilization, frequency, and accurate billing of treatment. Due to changes and updates in CPT coding from 1992 to 1993, both years' CPT-4 codes are provided.

Because of dynamic changes in treatment for drug-exposed infants, and the enormity of the costs of care - both immediate and long-term - a tremendous burden is carried by provider facilities to manage costs and pricing. The rapid growth in the numbers of drug-exposed infants, coupled with the current uncertainty of health care reform, will require difficult decision-making by providers, third-party payors, and Federal and State governments. Ultimately, success in treating drug-exposed infants will be determined by these sectors of the health care industry.

Factors Influencing Provider Pricing

When examining the various services, procedures, and tests in the TIP from a pricing perspective, it is evident that a wide variety of factors influence provider charges. Understanding these factors is crucial in attempting to identify costs, or to evaluate pricing for a particular treatment program for drug-exposed infants.

Several major factors influence provider pricing:

Clinical Intensity - Pricing is influenced by the type of patient (severity), the type of NICU (such as, Level II or III), and the patient's diagnosis and prognosis.

Volume of Services - Hospitals develop pricing for specific units or departments with an assumption about the volume of services that each department will generate. Accordingly, departments that project low utilization often have high average charges. Conversely, departments with longer lengths of stay and projections of higher volumes may have low average charges.

Charge Development Methodologies - Many hospitals use charge development methodologies that are designed to achieve a wide variety of facility-specific financial objectives. For example, facilities may want to subsidize losses in one department with profits from another, or subsidize bad debt and charity care with revenues from other payors. Competition within the hospital market, based on price or the degree of managed care penetration, can also influence prices. Additionally, a third-party payor mix will also impact pricing of provider services.

Input Costs - Providers have wide differences in the level of their input costs which, in turn, affect their prices. The costs of labor and supplies can be substantially different, even among hospitals that are in the same area.

Organizational Structure - Many hospital providers have developed into complex entities that consist of multiple related facilities integrated into a network. Accordingly, charges may be influenced by multiple market areas or entities. Specific charges may include an administrative or a technical fee. Additionally, the frequency of charges from a variety of provider entities is to be considered. Moreover, some organizations use an all-inclusive rate concept that may cause room rates to be artificially high when compared to an organization that has an "unbundled" fee structure.

Cost Data - There is a wide variation in the quality of hospital cost information that supports price setting. Some providers have sophisticated cost finding and charge development systems, while others have very basic systems. Additionally, there are a wide variety of methodologies available within the more complex systems.