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Strategic Patient Discharge: The Case of Long-Term Care Hospitals

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  • Paul J. Eliason
  • Paul L. E. Grieco
  • Ryan C. McDevitt
  • James W. Roberts

Abstract

Medicare's prospective payment system for long-term acute-care hospitals (LTCHs) pro- vides modest reimbursements at the beginning of a patient's stay before jumping discontinuously to a large lump-sum payment after a pre-specified number of days. We show that LTCHs respond to financial incentives by disproportionately discharging patients after they cross the large-payment threshold, resulting in worse outcomes for patients. We find this occurs more often at for-profit facilities, facilities acquired by leading LTCH chains, and facilities co-located with other hospitals. Using a dynamic structural model, we evaluate counterfactual payment policies that would provide substantial savings for Medicare without adversely affecting patients.

Suggested Citation

  • Paul J. Eliason & Paul L. E. Grieco & Ryan C. McDevitt & James W. Roberts, 2016. "Strategic Patient Discharge: The Case of Long-Term Care Hospitals," NBER Working Papers 22598, National Bureau of Economic Research, Inc.
  • Handle: RePEc:nbr:nberwo:22598
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    References listed on IDEAS

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    1. Francesco Decarolis, 2015. "Medicare Part D: Are Insurers Gaming the Low Income Subsidy Design?," American Economic Review, American Economic Association, vol. 105(4), pages 1547-1580, April.
    2. Sujoy Chakravarty & Martin Gaynor & Steven Klepper & William B. Vogt, 2006. "Does the profit motive make Jack nimble? Ownership form and the evolution of the US hospital industry," Health Economics, John Wiley & Sons, Ltd., vol. 15(4), pages 345-361, April.
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    4. Leemore S. Dafny, 2005. "How Do Hospitals Respond to Price Changes?," American Economic Review, American Economic Association, vol. 95(5), pages 1525-1547, December.
    5. Kate Ho & Ariel Pakes, 2014. "Hospital Choices, Hospital Prices, and Financial Incentives to Physicians," American Economic Review, American Economic Association, vol. 104(12), pages 3841-3884, December.
    6. Nathan E. Wilson, 2016. "For-profit status and industry evolution in health care markets: evidence from the dialysis industry," International Journal of Health Economics and Management, Springer, vol. 16(4), pages 297-319, December.
    7. Dranove, David, 1988. "Pricing by non-profit institutions : The case of hospital cost-shifting," Journal of Health Economics, Elsevier, vol. 7(1), pages 47-57, March.
    8. Paul L. E. Grieco & Ryan C. McDevitt, 2017. "Productivity and Quality in Health Care: Evidence from the Dialysis Industry," Review of Economic Studies, Oxford University Press, vol. 84(3), pages 1071-1105.
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    Blog mentions

    As found by EconAcademics.org, the blog aggregator for Economics research:
    1. Sam Watson’s journal round-up for 12th November 2018
      by Sam Watson in The Academic Health Economists' Blog on 2018-11-12 15:46:49

    Citations

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    Cited by:

    1. Liran Einav & Amy Finkelstein, 2018. "Moral Hazard in Health Insurance: What We Know and How We Know It," Journal of the European Economic Association, European Economic Association, vol. 16(4), pages 957-982.
    2. Mizuma, Kimiko & Amitani, Marie & Mizuma, Midori & Kawazu, Suguru & Sloan, Robert A. & Ibusuki, Rie & Takezaki, Toshiro & Owaki, Tetsuhiro, 2020. "Clarifying differences in viewpoints between multiple healthcare professionals during discharge planning assessments when discharging patients from a long-term care hospital to home," Evaluation and Program Planning, Elsevier, vol. 82(C).
    3. Berta, Paolo & De Fraja, Gianni & Verzillo, Stefano, 2018. "Optimal Healthcare Contracts: Theory and Empirical Evidence from Italy," CEPR Discussion Papers 13357, C.E.P.R. Discussion Papers.
    4. Liran Einav & Amy Finkelstein & Yunan Ji & Neale Mahoney, 2020. "Randomized trial shows healthcare payment reform has equal-sized spillover effects on patients not targeted by reform," Proceedings of the National Academy of Sciences, Proceedings of the National Academy of Sciences, vol. 117(32), pages 18939-18947, August.
    5. Liran Einav & Amy Finkelstein, 2017. "Moral Hazard in Health Insurance: What We Know and How We Know It," NBER Working Papers 24055, National Bureau of Economic Research, Inc.
    6. Clara Pott & Tom Stargardt & Udo Schneider & Simon Frey, 2021. "Do discontinuities in marginal reimbursement affect inpatient psychiatric care in Germany?," The European Journal of Health Economics, Springer;Deutsche Gesellschaft für Gesundheitsökonomie (DGGÖ), vol. 22(1), pages 101-114, February.
    7. Liran Einav & Amy Finkelstein & Yunan Ji & Neale Mahoney, 2020. "Voluntary Regulation: Evidence from Medicare Payment Reform," NBER Working Papers 27223, National Bureau of Economic Research, Inc.
    8. Liran Einav & Amy Finkelstein & Neale Mahoney, 2018. "Provider Incentives and Healthcare Costs: Evidence From Long‐Term Care Hospitals," Econometrica, Econometric Society, vol. 86(6), pages 2161-2219, November.
    9. Yang, Ou & Chan, Marc K. & Cheng, Terence C. & Yong, Jongsay, 2020. "Cream skimming: Theory and evidence from hospital transfers and capacity utilization," Journal of Economic Behavior & Organization, Elsevier, vol. 173(C), pages 68-87.
    10. Liran Einav & Amy Finkelstein & Neale Mahoney, 2017. "Provider Incentives and Healthcare Costs: Evidence from Long-Term Care Hospitals," NBER Working Papers 23100, National Bureau of Economic Research, Inc.

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    More about this item

    JEL classification:

    • D22 - Microeconomics - - Production and Organizations - - - Firm Behavior: Empirical Analysis
    • I11 - Health, Education, and Welfare - - Health - - - Analysis of Health Care Markets
    • I18 - Health, Education, and Welfare - - Health - - - Government Policy; Regulation; Public Health

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