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Does how much and how you pay matter? Evidence from the inpatient rehabilitation care prospective payment system

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  • Sood, Neeraj
  • Buntin, Melinda Beeuwkes
  • Escarce, José J.

Abstract

We use the implementation of a new prospective payment system (PPS) for inpatient rehabilitation facilities (IRFs) to investigate the effect of changes in marginal and average reimbursement on costs. The results show that the IRF PPS led to a significant decline in costs and length of stay. Changes in marginal reimbursement associated with the move from a cost-based system to a PPS led to a 7-11% reduction in costs. The elasticity of costs with respect to average reimbursement ranged from 0.26 to 0.34. Finally, the IRF PPS had little or no impact on mortality or the rate of return to community residence.

Suggested Citation

  • Sood, Neeraj & Buntin, Melinda Beeuwkes & Escarce, José J., 2008. "Does how much and how you pay matter? Evidence from the inpatient rehabilitation care prospective payment system," Journal of Health Economics, Elsevier, vol. 27(4), pages 1046-1059, July.
    • Handle: RePEc:eee:jhecon:v:27:y:2008:i:4:p:1046-1059
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    1. Galina Besstremyannaya, 2014. "The adverse effects of value-based purchasing in health care: dynamic quantile regression with endogeneity," Discussion Papers 14-006, Stanford Institute for Economic Policy Research.
    2. Sood, Neeraj & Alpert, Abby & Barnes, Kayleigh & Huckfeldt, Peter & Escarce, José J., 2017. "Effects of payment reform in more versus less competitive markets," Journal of Health Economics, Elsevier, vol. 51(C), pages 66-83.
    3. 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.
    4. Huckfeldt, Peter J. & Sood, Neeraj & Escarce, José J. & Grabowski, David C. & Newhouse, Joseph P., 2014. "Effects of Medicare payment reform: Evidence from the home health interim and prospective payment systems," Journal of Health Economics, Elsevier, vol. 34(C), pages 1-18.
    5. Giuseppe Moscelli & Rowena Jacobs & Nils Gutacker & Maria Jose Aragón & Martin Chalkley & Anne Mason & Jan Böhnke, 2019. "Prospective payment systems and discretionary coding—Evidence from English mental health providers," Health Economics, John Wiley & Sons, Ltd., vol. 28(3), pages 387-402, March.
    6. Galina Besstremyannaya, 2013. "Heterogeneous hospital response to a per diem prospective payment system," Working Papers w0193, New Economic School (NES).
    7. Sood, Neeraj & Huckfeldt, Peter J. & Grabowski, David C. & Newhouse, Joseph P. & Escarce, José J., 2013. "The effect of prospective payment on admission and treatment policy: Evidence from inpatient rehabilitation facilities," Journal of Health Economics, Elsevier, vol. 32(5), pages 965-979.
    8. Galina Besstremyannaya & Dmitry Shapiro, 2012. "Heterogeneous effect of prospective payment system on hospital’s volume and quality," Working Papers w0181, Center for Economic and Financial Research (CEFIR).
    9. 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.
    10. Li‐Lin Liang, 2015. "Do Diagnosis‐Related Group‐Based Payments Incentivise Hospitals to Adjust Output Mix?," Health Economics, John Wiley & Sons, Ltd., vol. 24(4), pages 454-469, April.
    11. He, Daifeng & Mellor, Jennifer M., 2012. "Hospital volume responses to Medicare's Outpatient Prospective Payment System: Evidence from Florida," Journal of Health Economics, Elsevier, vol. 31(5), pages 730-743.
    12. Piia Pekola & Ismo Linnosmaa & Hennamari Mikkola, 2017. "Assessing the effects of price regulation and freedom of choice on quality: evidence from the physiotherapy market," Health Economics Review, Springer, vol. 7(1), pages 1-16, December.
    13. Galina Besstremyannaya, 2016. "Differential Effects of Declining Rates in a Per Diem Payment System," Health Economics, John Wiley & Sons, Ltd., vol. 25(12), pages 1599-1618, December.
    14. Galina Besstremyannaya, 2015. "The adverse effects of incentives regulation in health care: a comparative analysis with the U.S. and Japanese hospital data," Working Papers w0218, Center for Economic and Financial Research (CEFIR).
    15. Galina Besstremyannaya, 2015. "The adverse effects of incentives regulation in health care: a comparative analysis with the U.S. and Japanese hospital data," Working Papers w0218, New Economic School (NES).
    16. Jing Gu & Neeraj Sood & Abe Dunn & John Romley, 2019. "Productivity growth of skilled nursing facilities in the treatment of post-acute-care-intensive conditions," PLOS ONE, Public Library of Science, vol. 14(4), pages 1-14, April.

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