The Effect of Prospective Payment on Admission and Treatment Policy: Evidence from Inpatient Rehabilitation Facilities
We examine provider responses to the Medicare inpatient rehabilitation facility (IRF) prospective payment system (PPS), which simultaneously reduced marginal reimbursement and increased average reimbursement. IRFs could respond to the PPS by changing the total number of patients admitted, admitting different types of patients, or changing the intensity of care for admitted patients. We use Medicare claims data to separately estimate each type of provider response to the PPS. We also examine changes in patient outcomes and spillover effects on other post acute care providers. We find that costs of care initially fell following the PPS implementation, which we attribute to changes in treatment decisions rather than the types of patients admitted to IRFs. However, the probability of admission to IRFs increased after the PPS due to the expanded admission policies of providers. We find modest spillover effects on skilled nursing home costs and no substantive impact on patient health outcomes.
Corresponding Author: Neeraj Sood. The authors wish to acknowledge the role of Melinda Beeuwkes Buntin who was a critical part of the research team at the outset of this project. This study was funded in part by National Institute of Aging (NIA) Grant R01-AG031260. The views expressed herein are those of the authors and do not necessarily reflect the views of the National Bureau of Economic Research.
Sood, Neeraj & Huckfeldt, Peter J. & Grabowski, David C. & Newhouse, Joseph P. & Escarce, JosÃ© J., 2013. "The effect of prospective payment on admission and treatment policy: Evidence from inpatient rehabilitation facilities," Journal of Health Economics, Elsevier, vol. 32(5), pages 965-979. citation courtesy of