Paul J. Eliason
Department of Economics
213 Social Sciences Building
Durham, NC 27708
NBER Working Papers and Publications
|September 2016||Strategic Patient Discharge: The Case of Long-Term Care Hospitals|
with Paul L. E. Grieco, Ryan C. McDevitt, James W. Roberts: w22598
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.