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The Effect of Reimbursement on the Intensity of Hospital Services

Author

Listed:
  • Richard C. Lindrooth

    () (Medical University of South Carolina)

  • Gloria J. Bazzoli

    ()

  • Jan Clement

    ()

Abstract

We examine how hospital treatment intensity is affected by an exogenous change in average reimbursement for an admission. Theory predicts that treatment intensity would be most affected for highly profitable services but unaffected for unprofitable services. We use Medicare inpatient data from 11 states for 16 disease categories that vary in the generosity of reimbursement to test this prediction. Using the coefficients from quantile regressions, we calculate a difference-in-difference estimate of the effect of the Balanced Budget Act (BBA) of 1998, comparing the pre- and post-BBA change in treatment intensity at high Medicare share hospitals to low Medicare share hospitals. We find that not-for-profit hospitals cut treatment intensity at the 50th, 75th, and 95th quantiles only for generously reimbursed services. Intensity at the 25th percentile was unaffected, regardless of generosity. We did not measure a statistically significant response at for-profit or public hospitals to the BBA.

Suggested Citation

  • Richard C. Lindrooth & Gloria J. Bazzoli & Jan Clement, 2007. "The Effect of Reimbursement on the Intensity of Hospital Services," Southern Economic Journal, Southern Economic Association, vol. 73(3), pages 575-587, January.
  • Handle: RePEc:sej:ancoec:v:73:3:y:2007:p:575-587
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    References listed on IDEAS

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    Citations

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    Cited by:

    1. Richard J. Cebula, 2008. "Small Firm Size and Health Insurance: A Private Enterprise Perspective," Journal of Private Enterprise, The Association of Private Enterprise Education, vol. 24(Fall 2008), pages 51-77.
    2. David, Guy & Lindrooth, Richard C. & Helmchen, Lorens A. & Burns, Lawton R., 2014. "Do hospitals cross-subsidize?," Journal of Health Economics, Elsevier, vol. 37(C), pages 198-218.
    3. 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.
    4. Cebula, Richard, 2010. "Effects of Health Insurance and Medical Care Inflation on Voluntary Enlistment in the Army: An Empirical Study in the United States," MPRA Paper 51246, University Library of Munich, Germany.
    5. Jurgita Januleviciute & Jan Erik Askildsen & Oddvar Kaarboe & Luigi Siciliani & Matt Sutton, 2016. "How do Hospitals Respond to Price Changes? Evidence from Norway," Health Economics, John Wiley & Sons, Ltd., vol. 25(5), pages 620-636, May.
    6. Wanwiphang Manachotphong & Jirawat Panpiemras & Nada Wasi, 2016. "The Role of Reimbursement Approaches on Healthcare Demand: The Case of Thai Civil Servants Medical Benefit Scheme," PIER Discussion Papers 48, Puey Ungphakorn Institute for Economic Research, revised Nov 2016.

    More about this item

    JEL classification:

    • I11 - Health, Education, and Welfare - - Health - - - Analysis of Health Care Markets
    • I18 - Health, Education, and Welfare - - Health - - - Government Policy; Regulation; Public Health
    • L3 - Industrial Organization - - Nonprofit Organizations and Public Enterprise

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