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The Incidence of Adverse Medical Outcomes under Prospective Payment


  • Cutler, David M


This paper examines the effect on health outcomes of moving from cost-based to prospective reimbursement of hospitals. The paper reaches two conclusions. First, hospitals that experienced average price declines had a greater share of deaths occur in the hospital or shortly after discharge. By one year postdischarge, however, this increased mortality was eliminated. Second, there was an increase in readmission rates as hospitals were no longer reimbursed for marginal units of care they provided. This increased readmission appears to be due to accounting changes on the part of hospitals rather than changes in patient morbidity. Copyright 1995 by The Econometric Society.

Suggested Citation

  • Cutler, David M, 1995. "The Incidence of Adverse Medical Outcomes under Prospective Payment," Econometrica, Econometric Society, vol. 63(1), pages 29-50, January.
  • Handle: RePEc:ecm:emetrp:v:63:y:1995:i:1:p:29-50

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    References listed on IDEAS

    1. Heckman, James & Singer, Burton, 1984. "A Method for Minimizing the Impact of Distributional Assumptions in Econometric Models for Duration Data," Econometrica, Econometric Society, vol. 52(2), pages 271-320, March.
    2. Feldstein, Martin S, 1977. "Quality Change and the Demand for Hospital Care," Econometrica, Econometric Society, vol. 45(7), pages 1681-1702, October.
    3. Jeffrey E. Harris, 1977. "The Internal Organization of Hospitals: Some Economic Implications," Bell Journal of Economics, The RAND Corporation, vol. 8(2), pages 467-482, Autumn.
    4. Alan M. Garber & Victor R. Fuchs & James F. Silverman, 1983. "Case Mix, Costs, and Outcomes: Differences Between Faculty and Community Services in a University Hospital," NBER Working Papers 1159, National Bureau of Economic Research, Inc.
    5. Han, Aaron & Hausman, Jerry A, 1990. "Flexible Parametric Estimation of Duration and Competing Risk Models," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 5(1), pages 1-28, January-M.
    6. Gary Chamberlain, 1980. "Analysis of Covariance with Qualitative Data," Review of Economic Studies, Oxford University Press, vol. 47(1), pages 225-238.
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    More about this item

    JEL classification:

    • H40 - Public Economics - - Publicly Provided Goods - - - General
    • I18 - Health, Education, and Welfare - - Health - - - Government Policy; Regulation; Public Health


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