Working Paper: NBER ID: w1633
Authors: David S. Salkever; Donald M. Steinwachs; Agnes Rupp
Abstract: The simultaneous operation of per case and per servicepayment systems in Maryland, and the varying levels of stringency used in setting per case rates allows comparison of effects of differing incentive structures on hospital costs. This paper presents such a comparison with 1977-1981 data. Cost per case and total cost regressions show evidence of lower costs only when per case payment limits are very stringent. Positive net revenue incentives appear insufficient to induce reductions in length of stay and in ancillary services use. Our results suggest these changes in medical practice patterns are more likely under the threat of financial losses.
Keywords: hospital costs; payment systems; health economics; cost efficiency; Maryland
JEL Codes: I11; I18
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| Guaranteed Inpatient Revenue (GIR) program (H81) | lower costs for hospitals (I10) |
| stringent per case payment limits (D45) | lower costs for hospitals (I10) |
| stringency in payment limits (H74) | hospital cost efficiency (I10) |
| GIR incentives (O31) | management control over nursing care costs (J32) |
| GIR system (D50) | negative initial cost effect (D61) |
| GIR system (D50) | positive cost effect after 24 months (J32) |
| GIR system (D50) | lower routine costs (D23) |