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Regulated Revenues and Hospital Behavior: Evidence from a Medicare Overhaul

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Listed:
  • Tal Gross

    (Boston University and NBER)

  • Adam Sacarny

    (Columbia University and NBER)

  • Maggie Shi

    (University of Chicago and NBER)

  • David Silver

    (University of California, Santa Barbara and NBER)

Abstract

We study a 2008 policy reform in which Medicare revised its hospital payment system to better reflect patients’ severity of illness. We construct a simulated instrument that predicts a hospital’s policy-induced change in reimbursement using pre-reform patients and postreform rules. The reform led to large persistent changes in Medicare payment rates across hospitals. Hospitals that faced larger gains in Medicare reimbursement increased the volume of Medicare patients they treated. The estimates imply a volume elasticity of 1.2. To accommodate greater volume, hospitals increased nurse employment, but also lowered length of stay.

Suggested Citation

  • Tal Gross & Adam Sacarny & Maggie Shi & David Silver, 2024. "Regulated Revenues and Hospital Behavior: Evidence from a Medicare Overhaul," The Review of Economics and Statistics, MIT Press, vol. 106(6), pages 1709-1718, November.
    • Handle: RePEc:tpr:restat:v:106:y:2024:i:6:p:1709-1718
    DOI: 10.1162/rest_a_01254
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