Regulated Revenues and Hospital Behavior: Evidence from a Medicare Overhaul

Tal Gross, Adam Sacarny, Maggie Shi and David Silver
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Adam Sacarny: Columbia University and NBER
Maggie Shi: University of Chicago and NBER
David Silver: University of California, Santa Barbara and NBER

The Review of Economics and Statistics, 2024, vol. 106, issue 6, 1709-1718

Abstract: We study a 2008 policy reform in which Medicare revised its hospital payment system to better reflect patients’ severity of illness. We construct a simulated instrument that predicts a hospital’s policy-induced change in reimbursement using pre-reform patients and postreform rules. The reform led to large persistent changes in Medicare payment rates across hospitals. Hospitals that faced larger gains in Medicare reimbursement increased the volume of Medicare patients they treated. The estimates imply a volume elasticity of 1.2. To accommodate greater volume, hospitals increased nurse employment, but also lowered length of stay.

Date: 2024
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https://doi.org/10.1162/rest_a_01254
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Working Paper: Regulated Revenues and Hospital Behavior: Evidence from a Medicare Overhaul (2021)
Working Paper: Regulated Revenues and Hospital Behavior: Evidence from a Medicare Overhaul (2021)
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