The effect of prospective payment on admission and treatment policy: Evidence from inpatient rehabilitation facilities

Neeraj Sood, Peter J. Huckfeldt, David C. Grabowski, Joseph Newhouse and José J. Escarce

Journal of Health Economics, 2013, vol. 32, issue 5, 965-979

Abstract: We examine provider responses to the Medicare inpatient rehabilitation facility (IRF) prospective payment system (PPS), which simultaneously reduced marginal reimbursement and increased average reimbursement. IRFs could respond to the PPS by changing the number of patients admitted, admitting different types of patients, or changing the intensity of care. We use Medicare claims data to separately estimate each type of provider response. We also examine changes in patient outcomes and spillover effects on other post-acute care providers. We find that costs of care initially fell following the PPS, which we attribute to changes in treatment decisions rather than the characteristics of patients admitted to IRFs within the diagnostic categories we examine. However, the probability of admission to IRFs increased after the PPS due to the expanded admission policies of providers. We find modest spillover effects in other post-acute settings and negative health impacts for only one of three diagnostic groups studied.

Keywords: Medicare; Selection; Cream skimming; Mortality; Prospective payment (search for similar items in EconPapers)
JEL-codes: H42 H51 I11 I18 (search for similar items in EconPapers)
Date: 2013
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (10)

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Working Paper: The Effect of Prospective Payment on Admission and Treatment Policy: Evidence from Inpatient Rehabilitation Facilities (2011)
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Persistent link: https://EconPapers.repec.org/RePEc:eee:jhecon:v:32:y:2013:i:5:p:965-979

DOI: 10.1016/j.jhealeco.2013.05.003

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