Heterogeneous hospital response to a per diem prospective payment system
The paper provides the empirical support for heterogeneity in hospital response to changeover from the fee-for-service (FFS) system to a per diem prospective payment system (PPS). Using a recent administrative database for the universe of Japanese hospitals, I conduct estimations with dynamic panel data and show that hospitals with shorter (longer) average length of stay under FFS have longer (shorter) average length of stay under per diem PPS. The planned readmission rate increases under per diem PPS for FFS hospitals with longer average length of stay.
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