The Incidence of Adverse Medical Outcomes Under Prospective Payments

David Cutler

No 4300, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: This paper examines the effect of prospective payment for hospital care on adverse medical outcomes. In 1983, the federal government replaced its previous cost-based reimbursement method with a prospective payment system, where reimbursement depends only On the diagnosis of the patient. Hospitals thus lost the marginal reimbursement they formally received for providing additional treatments. In addition, the average price each received changed with fixed reimbursement. This paper related each of these changes to adverse outcomes, with two conclusions. First, there is a change in the timing of deaths associated with changes in average prices. In hospitals with price declines, a greater share of deaths occur in the hospital or shortly after discharge, but by one or two years post-discharge, this difference in mortality rates disappears. Second, there is a trend increase in readmission rates caused by the elimination of marginal reimbursement. This appears to be due to accounting changes on the part of hospitals, however, rather than true changes in morbidity.

JEL-codes: H40 I18 (search for similar items in EconPapers)
Date: 1993-03
Note: PE EH AG
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (4)

Published as Econometrica, February 1995, pp. 29-50

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Related works:
Journal Article: The Incidence of Adverse Medical Outcomes under Prospective Payment (1995)
Working Paper: The Incidence of Adverse Medical Outcome Under Prospective Payment (1992)
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