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Supplier-induced demand for newborn treatment: Evidence from Japan

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  • Shigeoka, Hitoshi
  • Fushimi, Kiyohide

Abstract

We estimate the degree of supplier-induced demand for newborn treatment by exploiting changes in reimbursement arising from the introduction of the partial prospective payment system (PPS) in Japan. Under the partial PPS, neonatal intensive care unit (NICU) utilization became relatively more profitable than other procedures, since it was excluded from prospective payments. We find that hospitals have responded to PPS adoption by increasing NICU utilization and by more frequently manipulating infants’ reported birth weights which in large part determine their maximum allowable stay in the NICU. This induced demand substantially increases the reimbursements received by hospitals.

Suggested Citation

  • 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.
    • Handle: RePEc:eee:jhecon:v:35:y:2014:i:c:p:162-178
    DOI: 10.1016/j.jhealeco.2014.03.003
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    More about this item

    Keywords

    Supplier-induced demand; Neonatal intensive care unit; Prospective payment system; Birth weight manipulation; Hospital gaming;
    All these keywords.

    JEL classification:

    • I10 - Health, Education, and Welfare - - Health - - - General
    • H51 - Public Economics - - National Government Expenditures and Related Policies - - - Government Expenditures and Health
    • L20 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - General

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