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Does how much and how you pay matter? Evidence from the inpatient rehabilitation care prospective payment system

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  • Sood, Neeraj
  • Buntin, Melinda Beeuwkes
  • Escarce, José J.

Abstract

We use the implementation of a new prospective payment system (PPS) for inpatient rehabilitation facilities (IRFs) to investigate the effect of changes in marginal and average reimbursement on costs. The results show that the IRF PPS led to a significant decline in costs and length of stay. Changes in marginal reimbursement associated with the move from a cost-based system to a PPS led to a 7-11% reduction in costs. The elasticity of costs with respect to average reimbursement ranged from 0.26 to 0.34. Finally, the IRF PPS had little or no impact on mortality or the rate of return to community residence.

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Bibliographic Info

Article provided by Elsevier in its journal Journal of Health Economics.

Volume (Year): 27 (2008)
Issue (Month): 4 (July)
Pages: 1046-1059

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Handle: RePEc:eee:jhecon:v:27:y:2008:i:4:p:1046-1059

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Web page: http://www.elsevier.com/locate/inca/505560

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  1. Chalkley, M. & Malcomson, J.M., 1998. "Government purchasing of health services," Discussion Paper Series In Economics And Econometrics 9821, Economics Division, School of Social Sciences, University of Southampton.
  2. Melinda Beeuwkes Buntin & Anita Datar Garten & Susan Paddock & Debra Saliba & Mark Totten & Jose J. Escarce, 2004. "How Much is Post-Acute Care Use Affected by Its Availability?," NBER Working Papers 10424, National Bureau of Economic Research, Inc.
  3. Randall P. Ellis & Thomas G. McGuire, 1994. "Hospital Response to Prospective Payment: Moral Hazard, Selection, and Practice-Style Effects," Papers 0050, Boston University - Industry Studies Programme.
  4. Shen, Yu-Chu, 2003. "The effect of financial pressure on the quality of care in hospitals," Journal of Health Economics, Elsevier, vol. 22(2), pages 243-269, March.
  5. David M. Cutler, 1993. "The Incidence of Adverse Medical Outcomes Under Prospective Payments," NBER Working Papers 4300, National Bureau of Economic Research, Inc.
  6. Hodgkin, Dominic & McGuire, Thomas G., 1994. "Payment levels and hospital response to prospective payment," Journal of Health Economics, Elsevier, vol. 13(1), pages 1-29, March.
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Cited by:
  1. He, Daifeng & Mellor, Jennifer M., 2012. "Hospital volume responses to Medicare's Outpatient Prospective Payment System: Evidence from Florida," Journal of Health Economics, Elsevier, vol. 31(5), pages 730-743.
  2. Sood, Neeraj & Huckfeldt, Peter J. & Grabowski, David C. & Newhouse, Joseph P. & Escarce, José J., 2013. "The effect of prospective payment on admission and treatment policy: Evidence from inpatient rehabilitation facilities," Journal of Health Economics, Elsevier, vol. 32(5), pages 965-979.
  3. Galina Besstremyannaya & Dmitry Shapiro, 2012. "Heterogeneous effect of prospective payment system on hospital’s volume and quality," Working Papers w0181, Center for Economic and Financial Research (CEFIR).
  4. Peter J. Huckfeldt & Neeraj Sood & José J Escarce & David C. Grabowski & Joseph P. Newhouse, 2012. "Effects of Medicare Payment Reform: Evidence from the Home Health Interim and Prospective Payment Systems," NBER Working Papers 17870, National Bureau of Economic Research, Inc.

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