Large Purchases Research Articles

Has The Leapfrog Group Had An Impact On The Health Care Market?

A number of large employers and public purchasers founded the Leapfrog Group in 2000 in an attempt to consolidate the purchaser voice and engage consumers and clinicians in improving health care quality. Drawing on evidence-based medicine, Leapfrog publicly releases information about the extent to which hospitals are adopting three safety "leaps" with the theoretical capacity to prevent thousands of deaths. Although the group has grown rapidly and achieved national recognition, employer-based initiatives historically have struggled to create changes in health care. This paper examines the impact of the Leapfrog Group and its efforts to address the challenges of employer initiatives.

Comments and Discussion

Comments and Discussion Ben S. Bernanke and Hélène Rey Ben S. Bernanke: Olivier Blanchard, Francesco Giavazzi, and Filipa Sa have produced a gem of a paper. They introduce a disarmingly simple model, which nevertheless provides a number of crucial insights about the joint dynamics of the current account and the exchange rate, in both the short and the long run. Their analysis will undoubtedly become a staple of graduate textbooks. The authors' model has two features that deserve special emphasis. First, following an older and unjustly neglected literature, the model dispenses with the usual interest rate parity condition in favor of the assumption that financial assets may be imperfect substitutes in investors' portfolios; that is, the model allows for the possibility that the demand for an asset may depend on features other than its rate of return, such as its liquidity or its usability as a component of international reserves. In focusing on imperfect asset substitutability and its implications, the authors identify an issue that has taken on great practical significance for policymakers in recent years. At least two contemporary policy debates turn in large part on the extent (or the existence) of imperfect asset substitutability. One is whether so-called nonstandard monetary policies—such as large purchases of government bonds or other assets by central banks—can stimulate the economy even when the policy interest rate has hit the zero lower bound. The other is whether sterilized foreign exchange interventions, like those recently undertaken on a massive scale by Japan and China, can persistently alter exchange rates and interest rates.1 The authors' analysis explores yet another important implication of imperfect substitutability: that, if assets denominated in different currencies are imperfect substitutes, then agents may rationally anticipate the sustained depreciation of a currency even in the absence [End Page 50] of cross-currency interest rate differentials. Thus, by invoking imperfect substitutability, the authors are able to show that expected dollar depreciation is not necessarily inconsistent with the currently low level of U.S. long-term nominal interest rates and the evident willingness of foreigners to hold large quantities of U.S. assets. The assumption that financial assets of varying characteristics are imperfectly substitutable in investor portfolios seems quite reasonable. (Almost as I write these words, an announcement by the U.S. Treasury that it is contemplating the reinstatement of the thirty-year bond seems to have triggered a jump in long-term bond yields, suggestive of a supply effect on returns.) However, both the theoretical and the empirical literatures on asset substitutability are exceedingly thin, which is a problem for assessing the quantitative implications of the authors' analysis. In particular, as they themselves note, in their model the speed of adjustment of the exchange rate and the current account depends importantly on the elasticities of foreign and domestic asset demands with respect to expected return differentials, numbers that are difficult to pin down with any confidence. Further complications arise if, as is plausibly the case, the degree of asset substitutability is not a constant but varies over time or across investors. For example, if private investors view assets denominated in different currencies as more substitutable than central banks do, which seems likely, then changes in the share of assets held by each type of investor will have implications for exchange rate dynamics. Finding satisfying microfoundations for the phenomenon of imperfect asset substitutability, and obtaining persuasive estimates of the degree of substitutability among various assets and for different types of investors, should be high on the profession's research agenda. The second feature of the authors' analysis worth special note is its attention to the long-run steady state. By integrating short-run and long-run analyses, the authors obtain some useful insights that a purely short-run approach does not deliver. Notably, they demonstrate that factors affecting the value of the dollar or the size of the U.S. current account deficit may have opposite effects in the short and in the long run. For example, an increased appetite for dollars on the part of foreign central banks is typically perceived by market participants as positive for the dollar in the short run, and the model supports...

Trends and Fashions in Fruit Cultivar Production

Introduction to the Workshop The market for fruit is experiencing extraordinary changes. Market consolidation has reduced the number of major retail channels and the needs of these large purchasers increasingly drive commodity production. At the same time, consumer affl uence is driving demand for new, exciting, and top-quality produce. Globalization of markets, combined with ability to ship and store produce more effectively, mean there is no longer a “season” for most fruit. Other signifi cant market forces are the emergence of convenience as a critical factor for routine consumption and a modest but signifi cant demand for low-spray or organic produce. Each of these factors infl uences the development of new fruit cultivars and the choices that growers make when establishing new plantings.

Suzanne F. Delbanco on the Leapfrog Group and employer purchasing power. Interview by Pamela K. Scarrow.

Suzanne F. Delbanco, PhD MPH, is the first executive director of The Leapfrog Group, founded by the Business Roundtable. The Leapfrog Group's goal is to mobilize employer purchasing power to initiate breakthrough improvements in the safety, quality, and overall value of healthcare for American consumers. The group's growing consortium of more than 155 Fortune 500 companies and other large private and public healthcare purchasers provides health benefits to more than 34 million Americans; these companies spend more than 62 billion dollars on healthcare annually. Dr. Delbanco is a member of the National Committee for Quality Assurance Purchaser Advisory Council and a board member of Bridges to Excellence. Before joining The Leapfrog Group, she was a senior manager at the Pacific Business Group on Health (PBGH), where she worked on the quality team. Prior to joining PBGH, she worked on reproductive health policy and the changing healthcare marketplace initiative at the Henry J. Kaiser Family Foundation. She has also consulted on health insurance coverage in the temporary employment industry and on the first statewide survey in California of MediCal beneficiaries, and worked as a community Liaison for Kaiser Permanente during the establishment of one of California's first County Organized Health Systems. She holds a PhD in public policy from the Goldman School of Public PoLicy and a MPH from the School of Public Health at the University of California, Berkeley.

Quality at Time of Purchase of Dried Milk Products Commercially Packaged in Reduced Oxygen Atmosphere

Nonfat dry milk (NDM) and powdered whey beverages are available at the retail level, packaged in No. 10 cans in a reduced oxygen atmosphere to prolong shelf life. The objective of this research was to determine the sensory and nutritional quality of these dried milk products at the time of purchase. In the 10 brands tested, wide variation existed in headspace oxygen, can seam quality, sensory quality, and vitamin A (with 6 of 10 brands entirely lacking the vitamin). Manufacturers of dried milk products packaged in cans for long-term storage need to give careful attention to can seam quality, product labeling, and vitamin fortification. Consumers would be well advised to evaluate several brands of dried milk products prior to large quantity purchases.

Changes in Institutional Ownership and Subsequent Earnings Announcement Abnormal Returns

This study documents an association between changes in institutional ownership during a calendar quarter and abnormal returns at the time of subsequent announcements of quarterly earnings. The result is driven by the portfolio returns of the extreme deciles of changes in institutional ownership, suggesting that institutions trade based on information about future earnings, but that such trading is not widespread. We also find that the difference between earnings announcement returns of the extreme deciles of change in institutional ownership is much greater when change in institutional ownership of a stock is driven by relatively few institutions, measured using the skewness of the distribution of change in institutional ownership of the stock. This result suggests that when fewer differentially informed investors make disproportionately large purchases or sales of stocks, a greater amount of the information on which they base their trades is not impounded in prices until the subsequent earnings announcement. Finally, we show that our results obtain for institutional investors with short-term focus, such as independent advisors, investment companies and insurance companies, but not for institutional investors with long- term focus, such as internally managed pension funds, educational institutions, and private foundations. This result further supports our conclusions regarding informed trading by institutions based on information about forthcoming earnings.

Public Purchasing and Eco-labelling Schemes: Making the Connection and Reinforcing Policy Coherence

Many governments have promoted eco-labelling schemes as an accurate information-based policy to regulate environmental problems. This paper argues that governments should integrate eco-labelling into their purchasing decisions, both to benefit the environment directly and to reinforce ecolabelling programs as a means to influence private purchasers. Both effects could be quite significant given that governments are large purchasers of goods and services. After reviewing the main barriers and potentialities for greening procurement markets, we explore several ways by which green public procurement can promote the overall diffusion of eco-labelled products. JEL codes: H57; Q 28

Research in Long-Term Care

Expenditures for long-term care for older Americans are sizable and likely to increase as the population ages. As the largest purchaser of health care for this group of citizens, the Centers for Medicare & Medicaid Services (CMS) is working to improve the quality of the long-term care services it purchases through quality monitoring and enforcement, providing information to beneficiaries about quality of care and enhancing resources to improve quality. Although CMS has used the best scientific information available to inform the planning of quality initiative projects, there are a number of issues, dilemmas, and challenges for which the research base is insufficient to fully answer programmatic needs. In many instances, research needs in the long-term care setting differ substantially from those in acute care. Using the Nursing Home Quality Initiative as an example, this article presents a descriptive, conceptual discussion of strategic issues and a summary of research that would be valuable in informing critical areas of decision-making in quality and outcomes research over the next decade. The issues, dilemmas, and challenges discussed are grouped into 5 categories: measurement methods and tools, uses of quality data, organizational and cultural factors, information and informatics, and impact evaluation and research.

Controversial Minority Shareholder: An Empirical Analysis

I analyze 136 large minority block purchases made by a group of controversial investors in Europe during 1990-2001. Contrary to the hypothesis that wants these investors expropriate the target companies, there is a positive market reaction to the first public announcement of these purchases. In the long-run, controversial investors earn an abnormal profit when they sell their stakes. When they still hold their positions at the end of the sample period (31 December 2001), abnormal returns are insignificant. Neither is there evidence that their activities improve operating performance, since ROA does not improve after the acquisitions. The findings are consistent with a superior stock picking ability of these investors, but they are not consistent with the hypothesis that these investors are governance champions.

The Leapfrog Group for Patient Safety: Rewarding Higher Standards

The Leapfrog Group is a consortium of more than 145 large health care purchasers committed to a common set of purchasing principles through which to leverage dramatic improvements in the safety, quality, and overall value of health care. Leapfrog purchasers mobilize consumers to seek out higher-quality providers, and they reward higher-quality providers. Leapfrog is primarily operationalized through Regional Roll-Outs--locally led purchaser efforts. The Leapfrog Group purchasers first focused on three patient safety practices, or "safety leaps," to reduce preventable medical errors--computer physician order entry, evidence-based hospital referral, and intensive care unit (ICU) physician staffing. Leapfrog's leaps are refined and updated annually on the basis of evidence and input from experts in the field. On the basis of survey results from the first 22 Regional Roll-Outs, as of September 2003, 4% of 633 hospitals reporting from the 22 regions fully met the CPOE standard, and an additional 17% of the 633 said they would meet the standard by 2005. Survey results also showed that 22% of the 605 hospitals in the 22 regions with ICUs met Leapfrog's ICU staffing recommendations and that an additional 5% would meet the standard by 2004. In 2004 Leapfrog will launch new Regional Roll-Outs, bringing Leapfrog consumer education, hospital-specific information, and purchasing strategies to more communities nationwide.

A distributed and interoperable object-oriented support for safe e-commerce transactions

Business via Internet is becoming popular. A number of organizations doing business in the traditional way are extending themselves to do business over the Web. Most business-to-business dealings are done through Value Added Networks but for general consumer-to-business dealings, the Internet provides a powerful base. However, customer confidence in Internet commerce needs to be further strengthened before large scale Internet purchasing and selling becomes a reality. While security standards have been established through efficient cryptographic techniques to ensure that network communications are not intercepted, the lack of trust between the endpoint parties involved in an e-commerce transaction remains an obstacle for a smooth completion of the transaction. This is because transacting parties need to trust each other before making any commitment. In this paper, we show how trust can be provided automatically through a network of Trust Service Providers (TSP). The solution we propose allows both customers and merchants to deal with each other confidently through trusted intermediaries which role is to guarantee the goods delivery to the customer and the payment to the merchant for issuing those goods. The transactions are conducted atomically and transparently. That is, a transaction process does not experience any off-line transition delay at the intermediaries and the transacting parties deal virtually directly with each other. This solution requires building a trust web based on a network of TSPs, which we implemented in the form of distributed CORBA objects.

Deriving two-stage learning sequences from knowledge in fuzzy sequential pattern mining

A fuzzy sequential pattern consisting of several fuzzy sets represents a frequently occurring behavior related to time and can be discovered from transaction bases. An example is that large purchase amounts of one product were bought by customers after these consumers had bought small purchase amounts of another product. Recently, Hu et al. (2003) proposed a fuzzy data mining method to discover fuzzy sequential patterns. In this method, consumers’ products preferences and consumers’ product buying orders related to purchase behaviors can be found in the fuzzy sequential pattern mining. Since for each decision problem, there is a competence set consisting of ideas, knowledge, information, and skills for solving that problem, we consider knowledge found in fuzzy sequential pattern mining as a needed competence set for solving one decision problem. This paper uses a known competence set expansion method, the minimum spanning table method, to find appropriate two-stage learning sequences that can effectively acquire individual fuzzy knowledge sets found in the fuzzy sequential pattern mining. A numerical example is used to show the usefulness of the proposed method.

Employers: passive purchasers or provocateurs?

This article addresses the potential role of business leadership in diverse efforts to reform health care financing: exploring managers efforts to alter health care markets in their role as large purchasers of health insurance, their potential contributions to future national policy proposals, and their involvement with community-level activities to control local health costs and quality. I argue that managers' leadership in market restructuring and community health initiatives will be difficult to reproduce in the realm of major national health policy initiatives due to constraints related to ideas, interests, and organization.

Building On The Job-Based Health Care System: What Would It Take?

Recent surveys indicate widespread public support for reforming health care by building on our mixed public/private system. The authors present a blueprint for such reform, along with design choices and their implications, that would improve access, cost control, and quality. Requiring employers to provide coverage, or at least to help workers obtain group insurance, combined with income-based premium subsidies, expanded public programs, and backup "insurance exchanges," would make affordable coverage available to nearly everyone. Cost control and quality improvement would be achieved mainly through pressures applied on the health care system by multiple, large purchasers that wield much buying power.

What does the Leapfrog Group portend for physicians?

N MARKET ECONOMIES, seller survival de­ pends on careful attention to evolving customer values. The Leapfrog Group, announced by the Business Roundtable's Fortune 500 CEO group in 2000 after a 3-year incubation, signals a new ap­ plication to providers of long-standing values of large industrial purchasers. These values warrant attention of physicians beyond the importance of the more than 35 million consumers insured by a growing list of more than 100 Leapfrog Group large employers. Employers sponsor the health insurance plans for a majority of Americans, and large private sector employers influence health care purchasing trends for smaller employers and government health benefit programs such as the Center for Medicare and Medicaid Service (CMS). Both CMS and the Department of Defense, which sponsor health benefit programs for more than 60 million additional Americans, are Leapfrog affili­ ate members. CMS recently announced that it would link its heavily trafficked Medicare benefi­ ciary website to the Leapfrog Group's website where hospitals are compared on their fulfillment of Leapfrog standards. The Leapfrog Group is initially promoting 3 leaps aimed at improving patient safety in urban hospitals l : (a) computer physician order entry (CPOE); (b) improved ICU physician staffing (IPS); and (c) evidence-based hospital referral for 7 complex, non-emergency treatments based on favorable risk-adjusted outcomes or higher annual volume (EHR). The 7 complex treatments encom­ pass coronary bypass, coronary angioplasty, ca­ rotid endarterectomy, abdominal aortic aneurysm repairs, esophageal cancer surgery, and high-risk

Acquisitions and Investment

We derive a simple theoretical framework in which acquisitions are treated as an alternative way of obtaining capital goods. Our framework predicts that both investment and acquisitions are positively related to a firm’s shadow value of capital. We transform our theoretical specification into an econometric model, which we then estimate using a long panel data‐set spanning 503 US firms over 15 consecutive years. Our results indicate that an increase in the shadow value of capital has approximately the same proportionate effect on the level of acquisitions as it does on investment. This result proves to be robust to a variety of alternative specifications.

A post-1990s assessment of strategic hospital alliances and their marketplace orientations: time to refocus.

In past years, many SHAs formed in local urban markets to better compete for managed care contracts. In response to 1990s forces, these SHAs appear to have adapted product, production, and selling orientations to their markets, aimed at large institutional purchasers of health care. However, health care markets have evolved differently than anticipated. SHAs and their hospitals should now adopt the marketing orientation and focus more on patients and enrollees.

The Impact of Vertical and Horizontal Differentiation on Minimum Efficient Scale in Investment Banking

We define Business-to-Business service firms as: advertising agencies, audit firms, investment banks, corporate law firms, and management consulting firms. These firms all share certain common characteristics: (i) their primary asset consists of the talent and reputation of their professional employees, (ii) compensation for their professional staff is a major cost of doing business, (iii) the services provided by the firms (unlike products) cannot be inventoried, and (iv) their services are marketed not to consumers, but to other institutions. A theoretical model is presented in this paper which explores vertical and horizontal differentiation in service industries. It is predicted that: B2B service firms will vertically differentiate in product quality; lesser (low) quality firms will horizontally differentiate in location (serving a local market), while superior (high) quality firms will horizontally agglomerate (serving clients nationally from a central location). In traditional consumer markets, we often find that larger purchasers are less quality conscious. For example, warehouse stores are oriented to provide relatively low quality service to retail clients who purchase in bulk. In B2B service markets, however, we predict that large purchasers will purchase from high quality firms, and small purchasers will purchase from low quality firms. Lastly, as a corollary to this analysis, we predict that high quality firms will have different cost curves compared to low quality firms. This model is tested using approximately 100,000 transactions from the Public Finance investment banking industry from 1986-1999. We find evidence of the predicted vertical differentiation, as well as clear evidence of horizontal agglomeration among the high quality firms, and horizontal differentiation among the low quality firms. Further, we find support for the proposition that high quality and low quality firms have different cost curves and different Minimum Efficient Scales (“MES”) of operation. This leads to the paradoxical outcome that the low quality firms can be operating at MES (for their quality level), while the high quality firms are still striving to achieve MES (although they are generally much larger than the low quality firms) even as both types of firms compete in the same general market. We test our predictions regarding MES by examining the size of the firms. For the low quality firms, we find that, by revenues, only 12% of the firms are operating below MES. For the high quality firms, we find initially that more than 50% of such firms are operating below MES. However, we find that over time approximately 80% of the high quality firms operating below MES exit the industry. These findings have important implications for firms' marketing strategies. We suggest that, in many B2B service markets, we are likely to see the continued existence of many small low quality regional competitors, while an ever reduced number of large firms strive to reach sufficient size on a global and national basis. Indeed, we suggest that for firms aspiring to be high quality B2B service firms, size may well be the key strategic marketing variable.

Managing Uncertainty: Intermediate Organizations as Triple Agents

�� In “Uncertainty and the Welfare Economics of Medical Care” (1963), Kenneth Arrow focused on the physician-patient relationship, which was by far the most important relationship in U.S. medical care at that time. With the development of managed care, “intermediate organizations” began to impinge on this formerly sacrosanct dyad, interacting in a complex web of relationships with patients, physicians, and one another (Figure 1). These organizations —i ncluding Health Maintenance Organizations (HMOs), Preferred Provider Organizations (PPOs), large medical groups such as Independent Practice Associations (IPAs), Physician-Hospital Organizations (PHOs), accreditation organizations such as the National Committee for Quality Assurance (NCQA), and large public and private purchasers of health insurance — function as double agents

Dartmouth Atlas of Vascular Health Care review: Impact of hospital volume, surgeon volume, and training on outcome

Dartmouth Atlas of Vascular Health Care review: Impact of hospital volume, surgeon volume, and training on outcome