Does How Much and How You Pay Matter? Evidence from the Inpatient Rehabilitation Facility Prospective Payment System

Neeraj Sood, Melinda Beeuwkes Buntin, Jose J. Escarce

NBER Working Paper No. 12556
Issued in October 2006
NBER Program(s):Health Care Program, Health Economics Program

We use the implementation of a new prospective payment system (PPS) for inpatient rehabilitation facilities (IRFs) to investigate the effect of changes in marginal and average reimbursement on costs. The results show that the IRF PPS led to a significant decline in costs and length of stay. Changes in marginal reimbursement associated with the move from a cost based system to a PPS led to a 7 to 11% reduction in costs. The elasticity of costs with respect average reimbursement ranged from 0.26 to 0.34. Finally, the IRF PPS had little or no impact on costs in other sites of care, mortality, or the rate of return to community residence.

Acknowledgments

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Document Object Identifier (DOI): 10.3386/w12556

Published: Sood, Neeraj, Melinda Beeuwkes Buntin, and Jose J. Escarce. "Does How Much and How You Pay Matter? Evidence from the Inpatient Rehabilitation Facility Prospective Payment System." Journal of Health Economics 27, 4 (July 2008): 1046-1059.

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