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Does how much and how you pay matter? Evidence from the inpatient rehabilitation care prospective payment system

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  • Sood, Neeraj
  • Buntin, Melinda Beeuwkes
  • Escarce, José J.

Abstract

We use the implementation of a new prospective payment system (PPS) for inpatient rehabilitation facilities (IRFs) to investigate the effect of changes in marginal and average reimbursement on costs. The results show that the IRF PPS led to a significant decline in costs and length of stay. Changes in marginal reimbursement associated with the move from a cost-based system to a PPS led to a 7-11% reduction in costs. The elasticity of costs with respect to average reimbursement ranged from 0.26 to 0.34. Finally, the IRF PPS had little or no impact on mortality or the rate of return to community residence.

Suggested Citation

  • 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.
  • Handle: RePEc:eee:jhecon:v:27:y:2008:i:4:p:1046-1059
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    References listed on IDEAS

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    1. 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.
    2. Cutler, David M, 1995. "The Incidence of Adverse Medical Outcomes under Prospective Payment," Econometrica, Econometric Society, vol. 63(1), pages 29-50, January.
    3. 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.
    4. Shen, Yu-Chu, 2003. "The effect of financial pressure on the quality of care in hospitals," Journal of Health Economics, Elsevier, vol. 22(2), pages 243-269, March.
    5. Chalkley, Martin & Malcomson, James M., 2000. "Government purchasing of health services," Handbook of Health Economics,in: A. J. Culyer & J. P. Newhouse (ed.), Handbook of Health Economics, edition 1, volume 1, chapter 15, pages 847-890 Elsevier.
    6. Melinda Beeuwkes Buntin & Anita Datar Garten & Susan Paddock & Debra Saliba & Mark Totten & Jose J. Escarce, 2004. "How Much is Post-Acute Care Use Affected by Its Availability?," NBER Working Papers 10424, National Bureau of Economic Research, Inc.
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    Cited by:

    1. Galina Besstremyannaya, 2014. "The adverse effects of value-based purchasing in health care: dynamic quantile regression with endogeneity," Discussion Papers 14-006, Stanford Institute for Economic Policy Research.
    2. Sood, Neeraj & Alpert, Abby & Barnes, Kayleigh & Huckfeldt, Peter & Escarce, José J., 2017. "Effects of payment reform in more versus less competitive markets," Journal of Health Economics, Elsevier, vol. 51(C), pages 66-83.
    3. Shigeoka, Hitoshi & Fushimi, Kiyohide, 2014. "Supplier-induced demand for newborn treatment: Evidence from Japan," Journal of Health Economics, Elsevier, vol. 35(C), pages 162-178.
    4. Huckfeldt, Peter J. & Sood, Neeraj & Escarce, José J. & Grabowski, David C. & Newhouse, Joseph P., 2014. "Effects of Medicare payment reform: Evidence from the home health interim and prospective payment systems," Journal of Health Economics, Elsevier, vol. 34(C), pages 1-18.
    5. Sood, Neeraj & Huckfeldt, Peter J. & Grabowski, David C. & Newhouse, Joseph P. & Escarce, José J., 2013. "The effect of prospective payment on admission and treatment policy: Evidence from inpatient rehabilitation facilities," Journal of Health Economics, Elsevier, vol. 32(5), pages 965-979.
    6. repec:cfr:cefirw:w0181 is not listed on IDEAS
    7. Rossella Verzulli & Gianluca Fiorentini & Matteo Lippi Bruni & Cristina Ugolini, 2017. "Price Changes in Regulated Healthcare Markets: Do Public Hospitals Respond and How?," Health Economics, John Wiley & Sons, Ltd., vol. 26(11), pages 1429-1446, November.
    8. 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.
    9. Galina Besstremyannaya, 2015. "The adverse effects of incentives regulation in health care: a comparative analysis with the U.S. and Japanese hospital data," Working Papers w0218, Center for Economic and Financial Research (CEFIR).

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