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Differential Effects of Declining Rates in a Per Diem Payment System

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  • Galina Besstremyannaya

Abstract

The paper demonstrates differential effects of a prospective payment system with declining per diem rates, dependent on the percentiles of length of stay. The analysis uses dynamic panel data estimates and a recent nationwide administrative database for major diagnostic categories in 1068 Japanese hospitals in 2006–2012 to show that average length of stay significantly increases for hospitals in percentiles 0–25 of the pre‐reform length of stay and significantly decreases for hospitals in percentiles 51–100. The decline of the average length of stay is larger for hospitals in higher percentiles of the length of stay. Hospitals in percentiles 51–100 significantly increase their rate of nonemergency/unanticipated readmissions within 42 days after discharge. The decline in the length of total episode of treatment is smaller for hospitals in percentiles 0–25. The findings are robust in terms of the choice of a cohort of hospitals joining the reform. The paper discusses applicability of ‘best practice’ rate‐setting to help improve the performance of hospitals in the lowest quartile of average length of stay. Copyright © 2015 John Wiley & Sons, Ltd.

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  • 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.
    • Handle: RePEc:wly:hlthec:v:25:y:2016:i:12:p:1599-1618
    DOI: 10.1002/hec.3128
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    Cited by:

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    2. 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.
    3. Pott, Clara & Stargardt, Tom & Frey, Simon, 2023. "Does prospective payment influence quality of care? A systematic review of the literature," Social Science & Medicine, Elsevier, vol. 323(C).
    4. Fengrong Liu & Jiayu Chen & Chaozhu Li & Fenghui Xu, 2023. "Cost Sharing and Cost Shifting Mechanisms under a per Diem Payment System in a County of China," IJERPH, MDPI, vol. 20(3), pages 1-12, January.
    5. Walsh, Brendan & Wren, Maev-Ann & Smith, Samantha & Lyons, Seán & Eighan, James & Morgenroth, Edgar, 2019. "An analysis of the effects on Irish hospital care of the supply of care inside and outside the hospital," Research Series, Economic and Social Research Institute (ESRI), number RS91.

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