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Medicare prospective payment and the volume and intensity of skilled nursing facility services

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  • Grabowski, David C.
  • Afendulis, Christopher C.
  • McGuire, Thomas G.
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    Abstract

    In 1998, Medicare adopted a per diem Prospective Payment System (PPS) for skilled nursing facility care, which was intended to deter the use of high-cost rehabilitative services. The average per diem decreased under the PPS, but because per diems increased for greater therapy minutes, the ability of the PPS to deter the use of high-intensity services was questionable. In this study, we assess how the PPS affected the volume and intensity of Medicare services. By volume we mean the product of the number of Medicare residents in a facility and the average length-of-stay, by intensity we mean the time per week devoted to rehabilitation therapy. Our results indicate that the number of Medicare residents decreased under PPS, but rehabilitative services and therapy minutes increased while length-of-stay remained relatively constant. Not surprisingly, when subsequent Medicare policy changes increased payment rates, Medicare volume far surpassed the levels seen in the pre-PPS period.

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    Bibliographic Info

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

    Volume (Year): 30 (2011)
    Issue (Month): 4 (July)
    Pages: 675-684

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    Handle: RePEc:eee:jhecon:v:30:y:2011:i:4:p:675-684

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

    Related research

    Keywords: Provider reimbursement Prospective payment Medicare Skilled nursing facility;

    References

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    1. Gruber, Jonathan, 1994. "The Incidence of Mandated Maternity Benefits," American Economic Review, American Economic Association, vol. 84(3), pages 622-41, June.
    2. Ellis, Randall P. & McGuire, Thomas G., 1986. "Provider behavior under prospective reimbursement : Cost sharing and supply," Journal of Health Economics, Elsevier, vol. 5(2), pages 129-151, June.
    3. Glied, Sherry & Zivin, Joshua Graff, 2002. "How do doctors behave when some (but not all) of their patients are in managed care?," Journal of Health Economics, Elsevier, vol. 21(2), pages 337-353, March.
    4. Ellis, Randall P. & McGuire, Thomas G., 1996. "Hospital response to prospective payment: Moral hazard, selection, and practice-style effects," Journal of Health Economics, Elsevier, vol. 15(3), pages 257-277, June.
    5. David Meltzer & Jeanette Chung & Anirban Basu, 2002. "Does Competition under Medicare Prospective Payment Selectively Reduce Expenditures on High-Cost Patients?," RAND Journal of Economics, The RAND Corporation, vol. 33(3), pages 447-468, Autumn.
    6. Mark McClellan, 1997. "Hospital Reimbursement Incentives: An Empirical Analysis," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 6(1), pages 91-128, 03.
    7. R. Konetzka & Edward Norton & Sally Stearns, 2006. "Medicare payment changes and nursing home quality: effects on long-stay residents," International Journal of Health Care Finance and Economics, Springer, vol. 6(3), pages 173-189, September.
    8. 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.
    9. Ellis, Randall P. & McGuire, Thomas G., 1990. "Optimal payment systems for health services," Journal of Health Economics, Elsevier, vol. 9(4), pages 375-396, December.
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    Cited by:
    1. Huckfeldt, Peter J. & Sood, Neeraj & Escarce, Jose J. & Grabowski, David C. & Newhouse, Joseph P., 2012. "Effects of Medicare Payment Reform: Evidence from the Home Health Interim and Prospective Payment Systems," Working Paper Series rwp12-007, Harvard University, John F. Kennedy School of Government.
    2. 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.
    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. Galina Besstremyannaya, 2013. "Heterogeneous hospital response to a per diem prospective payment system," Working Papers w0193, Center for Economic and Financial Research (CEFIR).

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