Strategic Patient Discharge: The Case of Long-Term Care Hospitals
Paul J. Eliason, Paul L. E. Grieco, Ryan C. McDevitt, James W. Roberts
American Economic Review · 2018 · Volume 108 · Issue 11
Abstract
Medicare's prospective payment system for long-term acute-care hospitals (LTCHs) provides modest reimbursements at the beginning of a patient's stay before jumping discontinuously to a large lump-sum payment after a prespecified number of days. We show that LTCHs respond to the financial incentives of this system by disproportionately discharging patients after they cross the large-payment threshold. We find this occurs more often at for-profit facilities, facilities acquired by leading LTCH chains, and facilities colocated with other hospitals. Using a dynamic structural model, we evaluate counterfactual payment policies that would provide substantial savings for Medicare.
Keywords
National Government Expenditures and Health, Analysis of Health Care Markets, Health Insurance, Public and Private, Health: Government Policy, Regulation, Public Health
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