Working Paper: NBER ID: w12556
Authors: Neeraj Sood; Melinda Beeuwkes Buntin; Jose J. Escarce
Abstract: 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.
Keywords: prospective payment system; inpatient rehabilitation facilities; cost reduction; health outcomes
JEL Codes: I11; I18
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| implementation of the IRF PPS (I18) | costs (J30) |
| implementation of the IRF PPS (I18) | length of stay (C41) |
| marginal reimbursement (I18) | costs (J30) |
| marginal reimbursement (I18) | length of stay (C41) |
| average reimbursement (I13) | costs (J30) |
| average reimbursement (I13) | length of stay (C41) |
| average reimbursement (I13) | marginal reimbursement (I18) |