Heterogeneous effect of prospective payment system on hospital’s volume and quality
AbstractIn early 2000s Japan introduced a special version of an inpatient prospective payment system (PPS) that contains incentives to increase efficiency and shorten the average length of stay (ALOS). This paper presents a theoretical model, which explains heterogeneous dynamics of volume and quality in a mixed PPS system. The model exploits two essential features of Japanese PPS: per diem payments and a length-of-stay dependent PPS tariff. The novelty of the model is that it incorporates hospitals heterogeneity through an explicit parameter of hospitals cost efficiency. The model predicts different directions of the change in ALOS for efficient and inefficient hospitals. Moreover, the decline in ALOS is shown to be associated with a rise in the rate for planned early readmissions. Using an administrative database for 684 Japanese PPS hospitals in 2007-2011, we conduct avearge treatment effect estimations with dynamic panel data and nd an empirical support for the predictions of the theoretical model.
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
Bibliographic InfoPaper provided by Center for Economic and Financial Research (CEFIR) in its series Working Papers with number w0181.
Length: 28 pages
Date of creation: Nov 2012
Date of revision:
Contact details of provider:
Postal: 117418 Russia, Moscow, Nakhimovsky pr., 47, office 720
Phone: +7 (495) 105 50 02
Fax: +7 (495) 105 50 03
Web page: http://www.cefir.ru
More information through EDIRC
This paper has been announced in the following NEP Reports:
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Cutler, D.M., 1992.
"The Incidence of Adverse Medical Outcome Under Prospective Payment,"
Harvard Institute of Economic Research Working Papers
1603, Harvard - Institute of Economic Research.
- Cutler, David M, 1995. "The Incidence of Adverse Medical Outcomes under Prospective Payment," Econometrica, Econometric Society, vol. 63(1), pages 29-50, January.
- David M. Cutler, 1993. "The Incidence of Adverse Medical Outcomes Under Prospective Payments," NBER Working Papers 4300, National Bureau of Economic Research, Inc.
- Newhouse, Joseph P. & Byrne, Daniel J., 1988. "Did Medicare's Prospective Payment System cause length of stay to fall?," Journal of Health Economics, Elsevier, vol. 7(4), pages 413-416, December.
- Randall P. Ellis & Thomas G. McGuire, 1994.
"Hospital Response to Prospective Payment: Moral Hazard, Selection, and Practice-Style Effects,"
0050, Boston University - Industry Studies Programme.
- 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.
- Neeraj Sood & Melinda Beeuwkes Buntin & Jose J. Escarce, 2006. "Does How Much and How You Pay Matter? Evidence from the Inpatient Rehabilitation Facility Prospective Payment System," NBER Working Papers 12556, National Bureau of Economic Research, Inc.
- M Arellano & O Bover, 1990.
"Another Look at the Instrumental Variable Estimation of Error-Components Models,"
CEP Discussion Papers
dp0007, Centre for Economic Performance, LSE.
- Arellano, Manuel & Bover, Olympia, 1995. "Another look at the instrumental variable estimation of error-components models," Journal of Econometrics, Elsevier, vol. 68(1), pages 29-51, July.
- Pope, Gregory C., 1989. "Hospital nonprice competition and medicare reimbursement policy," Journal of Health Economics, Elsevier, vol. 8(2), pages 147-172, June.
- Jean-Jacques Laffont & Jean Tirole, 1993. "A Theory of Incentives in Procurement and Regulation," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262121743, December.
- Blundell, R. & Bond, S., 1995.
"Initial Conditions and Moment Restrictions in Dynamic Panel Data Models,"
104, Economics Group, Nuffield College, University of Oxford.
- Blundell, Richard & Bond, Stephen, 1998. "Initial conditions and moment restrictions in dynamic panel data models," Journal of Econometrics, Elsevier, vol. 87(1), pages 115-143, August.
- Richard Blundell & Steve Bond, 1995. "Initial conditions and moment restrictions in dynamic panel data models," IFS Working Papers W95/17, Institute for Fiscal Studies.
- R Blundell & Steven Bond, . "Initial conditions and moment restrictions in dynamic panel data model," Economics Papers W14&104., Economics Group, Nuffield College, University of Oxford.
- Grabowski, David C. & Afendulis, Christopher C. & McGuire, Thomas G., 2011. "Medicare prospective payment and the volume and intensity of skilled nursing facility services," Journal of Health Economics, Elsevier, vol. 30(4), pages 675-684, July.
- Sood, Neeraj & Buntin, Melinda Beeuwkes & Escarce, José J., 2008. "Does how much and how you pay matter? Evidence from the inpatient rehabilitation care prospective payment system," Journal of Health Economics, Elsevier, vol. 27(4), pages 1046-1059, July.
- Windmeijer, Frank, 2005. "A finite sample correction for the variance of linear efficient two-step GMM estimators," Journal of Econometrics, Elsevier, vol. 126(1), pages 25-51, May.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Julia Babich).
If references are entirely missing, you can add them using this form.