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Measuring Hospital Cost-Sharing Incentives Under Refined Prospective Payment

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  • Boyd H. Gilman
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    This paper evaluates the usefulness of a model (McClellan, 1997) that was recently proposed for measuring reimbursement incentives under ongoing refinements to the hospital prospective payment system. The model is applied to a single major disease category (HIV infection) for which the hospital reimbursement system has undergone dramatic refinements in recent years. The paper highlights a problem in the original specification, namely, the use of endogenous costs as an explanatory variable. The paper illustrates how hospital response to both marginal price incentives (e.g., a change in the supply of payment-related services) and average price incentives (e.g., a change in the supply of non-payment-related services) can cause either over-or underestimation of payer cost sharing. In the present case study, overestimation of the marginal reimbursement incentives was evidenced. Obtaining cost-sharing estimates that can be used to evaluate alternative payment classification systems requires controlling for endogenous changes in hospital behavior. Copyright (c) 1999 Massachusetts Institute of Technology.

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    Article provided by Wiley Blackwell in its journal Journal of Economics & Management Strategy.

    Volume (Year): 8 (1999)
    Issue (Month): 3 (09)
    Pages: 433-452

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    Handle: RePEc:bla:jemstr:v:8:y:1999:i:3:p:433-452
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