TY  - JOUR
AU  - Wu,Vivian Y.
AU  - Shen,Yu-Chu
TI  - The Long-term Impact of Medicare Payment Reductions on Patient Outcomes
JF  - National Bureau of Economic Research Working Paper Series
VL  - No. 16859
PY  - 2011
Y2  - March 2011
UR  - http://www.nber.org/papers/w16859
L1  - http://www.nber.org/papers/w16859.pdf
N1  - Author contact info:
Vivian Wu
University of Southern California
School of Policy, Planning, and Development
650 Childs Way, RGL 305
Los Angeles, CA 90089
Tel: 617-588-0320
E-Mail: vwu@nber.org

Yu-Chu Shen
Graduate School of Business and Public Policy
Naval Postgraduate School
555 Dyer Road
Monterey, CA 93943
Tel: 831/656-2951
E-Mail: yshen@nps.edu
AB  - This study examines the long term impact of Medicare payment reductions on patient outcomes using a natural experiment - the Balance Budget Act (BBA) of 1997. We use predicted Medicare revenue changes due to BBA, with simulated BBA payment cuts as an instrument, to categorize hospitals by degrees of payment cuts (small, moderate, or large), and follow Medicare patient outcomes in these hospitals over a 11 year panel: 1995-1997 pre-BBA, 1998-2000 initial years of BBA, and 2001-2005 post-BBA years. We find that Medicare AMI mortality trends stay similar across hospitals when comparing between pre-BBA and initial-BBA periods.  However, the trends began to diverge in 2001-2005: hospitals facing large payment cuts saw increased mortality rates relative to that of hospitals facing small cuts in the post-BBA period (2001-2005) after controlling for their pre-BBA trends. We find support that part of the higher AMI mortalities among large-cut hospitals are explained by reductions in staffing level and operating cost following the payment cuts.
ER  -