Long-Term Care Hospitals: A Case Study in Waste

Liran Einav, Amy Finkelstein and Neale Mahoney
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Amy Finkelstein: MIT and NBER
Neale Mahoney: Stanford University and NBER

The Review of Economics and Statistics, 2023, vol. 105, issue 4, 745-765

Abstract: There is substantial waste in U.S. healthcare but little consensus on how to combat it. We identify one source of waste: long-term care hospitals (LTCHs). Using the entry of LTCHs into hospital markets in an event study design, we find that most LTCH patients would have counterfactually received care at Skilled Nursing Facilities—facilities that provide medically similar care but are paid significantly less—and that substitution to LTCHs leaves patients unaffected or worse off on all dimensions we can objectively measure. Our results imply Medicare could save about $4.6 billion per year by not allowing discharge to LTCHs.

Date: 2023
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https://doi.org/10.1162/rest_a_01092

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Working Paper: Long-Term Care Hospitals: A Case Study in Waste (2018)
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