Hospital response to prospective payment: moral hazard, selection, and practice-style effects.
In response to a change in reimbursement incentives, hospitals may change the intensity of services provided to a given set of patients, change the type (or severity) of patients they see, or change their market share. Each of these three responses, which we define as a moral hazard effect, a selection effect, and a practice-style effect, can influence average resource use in a population. We develop and implement a methodology for disentangling these effects using a panel data set of Medicaid psychiatric discharges in New Hampshire. We also find evidence for the form of quality competition hypothesized by Dranove (1987).
Ellis
R P
RP
Department of Economics, Boston University, MA 02215, USA.
McGuire
T G
TG
D000293:Adolescent; D000328:Adult; D003953:Diagnosis-Related Groups / Q000191:economics; D005260:Female; D006302:Health Services Research; D006778:Hospitals, Psychiatric / Q000191:economics* / Q000706:statistics & numerical data; D006801:Humans; D007902:Length of Stay; D008297:Male; D008484:Medicaid / Q000191:economics / Q000458:organization & administration*; D001523:Mental Disorders; D008875:Middle Aged; D018803:Models, Economic; D009513:New Hampshire; D010343:Patient Admission / Q000706:statistics & numerical data; D011445:Prospective Payment System / Q000706:statistics & numerical data*; D014481:United States