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The Effect of Reimbursement on the Intensity of Hospital Services

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  • Richard C. Lindrooth

    ()
    (Medical University of South Carolina)

  • Gloria J. Bazzoli

    ()

  • Jan Clement

    ()

Abstract

We examine how hospital treatment intensity is affected by an exogenous change in average reimbursement for an admission. Theory predicts that treatment intensity would be most affected for highly profitable services but unaffected for unprofitable services. We use Medicare inpatient data from 11 states for 16 disease categories that vary in the generosity of reimbursement to test this prediction. Using the coefficients from quantile regressions, we calculate a difference-in-difference estimate of the effect of the Balanced Budget Act (BBA) of 1998, comparing the pre- and post-BBA change in treatment intensity at high Medicare share hospitals to low Medicare share hospitals. We find that not-for-profit hospitals cut treatment intensity at the 50th, 75th, and 95th quantiles only for generously reimbursed services. Intensity at the 25th percentile was unaffected, regardless of generosity. We did not measure a statistically significant response at for-profit or public hospitals to the BBA.

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Bibliographic Info

Article provided by Southern Economic Association in its journal Southern Economic Journal.

Volume (Year): 73 (2007)
Issue (Month): 3 (January)
Pages: 575–587

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Handle: RePEc:sej:ancoec:v:73:3:y:2007:p:575-587

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Web page: http://www.southerneconomic.org/
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Cited by:
  1. Cebula, Richard, 2010. "Effects of Health Insurance and Medical Care Inflation on Voluntary Enlistment in the Army: An Empirical Study in the United States," MPRA Paper 51246, University Library of Munich, Germany.
  2. Cebula, Richard, 2007. "Small Firm Size and Health Insurance: A Private Enterprise Perspective," MPRA Paper 50939, University Library of Munich, Germany, revised 10 Apr 2007.
  3. Janueleviciute, Jurgita & Askildsen, Jan Erik & Kaarbøe, Oddvar & Siciliani, Luigi & Sutton, Matt, 2013. "How Do Hospitals Respond To Price Changes?Evidence From Norway," Working Papers in Economics 15/12, University of Bergen, Department of Economics.

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