Strategic Patient Discharge: The Case of Long-Term Care Hospitals
NBER Working Paper No. 22598
Issued in September 2016, Revised in January 2017
NBER Program(s):Health Care, Health Economics, Industrial Organization
Medicare's prospective payment system for long-term acute-care hospitals (LTCHs) pro- vides modest reimbursements at the beginning of a patient's stay before jumping discontinuously to a large lump-sum payment after a pre-specified number of days. We show that LTCHs respond to financial incentives by disproportionately discharging patients after they cross the large-payment threshold, resulting in worse outcomes for patients. We find this occurs more often at for-profit facilities, facilities acquired by leading LTCH chains, and facilities co-located with other hospitals. Using a dynamic structural model, we evaluate counterfactual payment policies that would provide substantial savings for Medicare without adversely affecting patients.
A non-technical summary of this paper is available in the 2016 number 3 issue of the NBER Bulletin on Aging and Health. You can sign up to receive the NBER Bulletin on Aging and Health by email.
Machine-readable bibliographic record -
Document Object Identifier (DOI): 10.3386/w22598
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