title: Hospital cost and efficiency under per service and per case payment in Maryland: a tale of the carrot and the stick.
abstract: The simultaneous operation of per case and per service payment systems in Maryland, and the varying levels of stringency used in setting per case rates, allows a comparison of the effects of differing incentive structures on hospital costs. This paper presents such a comparison with 1977-1981 data. Regressions performed on cost-per-case and total cost data indicate that costs were lower only when per case payment limits were very stringent. Positive net revenue incentives appeared to be insufficient to induce a reduction in length of stay or ancillary services use. These changes in medical practice patterns thus appear more likely under the threat of financial losses--that is, under the threat of the stick rather than the inducement of the carrot.
mesh_terms: D000720:Ancillary Services, Hospital / Q000191:economics; D003363:Cost Control / Q000379:methods; D003365:Costs and Cost Analysis; D003953:Diagnosis-Related Groups / Q000191:economics*; D004469:Economics, Hospital / Q000639:trends*; D004526:Efficiency; D006784:Hospitals, Teaching / Q000191:economics; D007902:Length of Stay; D008396:Maryland; D011445:Prospective Payment System / Q000379:methods*; D012051:Reimbursement Mechanisms / Q000379:methods*; D012052:Reimbursement, Incentive / Q000191:economics