NATIONAL BUREAU OF ECONOMIC RESEARCH
NATIONAL BUREAU OF ECONOMIC RESEARCH

Hospital Cost and Efficiency Under Per Service and Per Case Payment in Maryland: A Tale of the Carrot and the Stick

David S. Salkever, Donald M. Steinwachs, Agnes Rupp

NBER Working Paper No. 1633 (Also Reprint No. r0743)
Issued in June 1985
NBER Program(s):   HE

The simultaneous operation of per case and per servicepayment systems in Maryland, and the varying levels of stringency used in setting per case rates allows comparison of effects of differing incentive structures on hospital costs. This paper presents such a comparison with 1977-1981 data. Cost per case and total cost regressions show evidence of lower costs only when per case payment limits are very stringent. Positive net revenue incentives appear insufficient to induce reductions in length of stay and in ancillary services use. Our results suggest these changes in medical practice patterns are more likely under the threat of financial losses.

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Document Object Identifier (DOI): 10.3386/w1633

Published: Salkever, David S., Donald M. Steinwachs, and Agnes Rupp."Hospital Cost and Efficiency Under Per Service and Per Case Payment in Maryland: A Tale ofthe Carrot and the Stick." Inquiry, Vol. 23, (Spring 1986), pp. 56-66.

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