Medicare's Outpatient Prospective Payment System and Hospital Admission Decisions (original) (raw)
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Change in the Medicare case-mix index in the 1980s and the effect of the prospective payment system
Health services research, 1992
Persistent increases in the Medicare case-mix index over the 1980s have been ascribed to changes both in medical treatment ("real changes") and in the way medical information is recorded ("coding changes") in hospitals. These changes have been attributed, in the absence of appropriate data and analyses, to the incentives of the Medicare prospective payment system (PPS). Using data for 1980-1986 from 235 hospitals, we estimate the effect on the Medicare case-mix index of a series of variables that reflect medical treatments and coding practices. Each of these underlying real or coding variables was changing prior to PPS and would likely have continued to change even in the absence of PPS. Furthermore, PPS may have had a distinct effect on these variables. These underlying trends and the PPS effects must each be estimated. Thus, the analysis begins by developing separate estimates for each of these real and coding variables (1) in the absence of PPS (autonomous eff...
Case shifting and the Medicare Prospective Payment System
American Journal of Public Health, 1988
We assessed impacts of the Medicare Prospective Payment System (PPS) during its first two years of operation (1984-85) on 467 hospitals using data from the Commission on Professional and Hospital Activities and from the American Hospital Association. Medicare discharges as a per cent of total discharges remained constant between 1983 and 1985, but the per cent of uninsured patients increased, especially at large public hospitals. The number of Medicare and total discharges per hospital declined. The number of complex diagnosis related groups (DRGs) increased, both for Medicare and non-Medicare. This trend began before the implementation of PPS and affected all types of hospitals. There was also Address reprint requests to Michael A
Institutional responses to Medicare's prospective payment system
Health Policy, 1993
The introduction of Medicare's prospective payment system (PPS) meant an important change in the environment of US hospitals. The new payment system was expected to improve clinical and non-clinical efficiency in hospitals. A case study in a non-profit Pennsylvania hospital was performed to analyse the impact of PPS on hospital services. The hospital responded to PPS by a twofold strategy. First, attempts were made to achieve effective cost containment by improving the efficiency of intermediate and final outputs. Here special attention is paid to the activities of the DRG coordinator and the Utilization Review Committee and to the activities of nurses in their role as case manager. The second strategy was directed at revenue enhancement, initially mainly by shifting more costs to non-Medicare patients and later by trying to strengthen the position of the hospital in the local health care market. This second strategy was considered more important than the strategy of cost containment. With respect to organizational structure and policy-making, the following changes can be observed: a growing importance of strategic management; more integrated hospital-physician relationships; and the development of an adequate medical information system and a medical records department.
Forum for Health Economics & Policy, 2002
Competition and prospective payment systems have been widely used to attempt to control health care costs. Although much of the increase in medical costs over the past half-century has been concentrated among a few high-cost users of health care, prospective payment systems may provide incentives to reduce expenditures selectively on high-cost users relative to low-cost users, and this pressure may be increased by competition. We use data on hospital charges and cost-to-charge ratios from California in 1983 and 1993 to examine the effects of competition on costs for high- and low-cost admissions before and after the establishment of the Medicare Prospective Payment System (PPS). Comparing persons above and below age 65 before and after the establishment of PPS, we find that competition is associated with increased costs before PPS in both age groups, but decreased costs afterwards, especially among those above age 65 with the highest costs. We conclude that the combination of compet...
International Journal for Quality in Health Care, 2005
Using insurance claims for hemorrhoidectomies, we examined the effect of Taiwan's Bureau of National Health Insurance's case payment system, a fixed case payment rate method used to reimburse health care providers for in-patient care. This observational natural experimental study examined changes in medical care that occurred between two phases: the 9 months before case payment system was implemented on 1 October 1997 and the 9 months afterwards. The changes were analyzed by performing linear regressions with interaction between hospital type and the implementation of case payment system. This study was based on total claim data from National Health Insurance. A total of 23 638 hemorrhoidectomy insurance claims. Length of stay, number of medical services, and number of drug prescriptions. Medical services were stratified into those that were considered minimal requirements and those considered optional by the Bureau of National Health Insurance. Over the 18-month period, the number of patients increased by 23.7%. After the case payment system was implemented, length of stay decreased by 0.59 days (P < 0.0001), the number of minimally required services increased by 2.19 to 4.24 items (P < 0.0001), the number of optional service items decreased by 0.32 items (P < 0.0001), and drug prescription decreased slightly by 0.58 to 0.99 items (P < 0.0001) per hospitalization. The case payment system successfully shortened length of stay without significantly sacrificing the provision of services.
Provider behavior under prospective reimbursement
Journal of Health Economics, 1986
This paper develops a model in which physicians choose the level of services to be provided to their patients. We show that if physicians undervalue benelits to patients relative to hospital profits, prospective payment, a system in which hospitals receive a payment dependent on the diagnosis-related group within which a patient falls, can lead to too few services being provided. In contrast, a 'cost-based' reimbursement system is shown to result in too many services being provided. Competition between hospitals for physicians will tend to augment both of these problems. We also examine a mixed reimbursement system, in which hosp%l reimbursements are paid partly prospectively and partly cost-based. This system is shown under a variety of circumstances to be superior to the other two reimbursement systems by improving the incentives for the efficient level of services, reducing incentives to unnecessarily admit or reclassify patients, and reducing risk to providers.
Journal of Public Economics - J PUBLIC ECON, 1993
This paper investigates an efficiency implication of Medicare's prospective payment system (PPS) on the utilization of United States Veterans Affairs (VA) hospital inpatient services by elderly veterans. There is empirical evidence to suggest that non-VA hospitals are reacting to PPS by increasingly shifting veterans they expect may be high-cost to VA hospitals. We define as efftcient, allocations that would occur if hospitals acted as perfect agents of the patient, then we show that some shifting would still occur if allocations were efficient. This is because VA and non-VA hospitals operate under different budget regimes, and within each diagnosis related group, veterans with different levels of illness severity (and different non-VA insurance packages) will self-select into VA and non-VA hospitals. We derive conditions of severity under which different hospital types become attractive to particular patients.
We use a panel of hospitals from Washington state to examine the impact of government reimbursement on a provider's costs. We find that providers change their relative patient mix when Medicare and Medicaid lower reimbursement rates. On a percentage change basis, the magnitudes of these changes are small; however, the overall economic impacts are quite large. Additionally, our findings indicate that a number of other factors significantly influence a provider's costs, including patient demographics, initial illness severity and input market conditions facing the firm. We thank two anonymous reviewers for their helpful comments. We also thank William Greene for valuable econometric advice when making revisions to this manuscript. Remaining errors are our own.
Prospective payment system: consequences for hospital-physician interactions in the private sector
2004
In 2004, French health authorities plan to introduce a prospective payment system for hospitals delivering acute care based on the DRG classification system. In this paper, we analyze the consequences of this switch from a retrospective to a prospective payment system on the ability of physicians and hospital managers to coordinate their activity in the production of hospital stays. Our analysis follows those of Dor and Watson (1995) and Custer et al. (1990) but is adapted to the context of the French hospital private sector. Different types of interactions are considered : non-cooperative, dominant-reactive, and cooperative. The main result of this analysis is that, in a context in which average per-patient fees are maintained, the change of payment system is potentially gainful for both partners. Although their fees are not concerned by the reform, physicians are even in a better position than hospitals tot ake advantage of the change of payment system. A minimum level of coordina...