title: Revisiting Rogowski and Newhouse on the indirect costs of teaching: a note on functional form and retransformation in Medicare's payment formulas.
abstract: In 1992 Rogowski and Newhouse identified errors in functional form and retransformation in the econometric model that underlies Medicare's payments to teaching hospitals. We re-estimate their model and expand on their work, with data from the following decade. We find: (1) the functional form imposed by Health Care Financing Administration's original specification of the teaching variable is supported by the data; (2) there is no evidence of a threshold effect when the teaching intensity variable is appropriately specified; (3) there is no longer evidence of heteroscedasticity across teaching hospital types, consequently there is no need to incorporate re-transformation factors into the payment formula. We attribute the differences in our findings to secular changes in the hospital industry and improvements in variable measurement.
authors.affiliation: Cecil G. Sheps Center for Health Services Research, Chapel Hill, NC 27599-7590, USA. kathleen_dalton@unc.edu
authors.forename: K
authors.initials: K
authors.lastname: Dalton
authors.forename: E C
authors.initials: EC
authors.lastname: Norton
mesh_terms: D003361:Cost Allocation; D006302:Health Services Research; D017721:Hospital Costs; D006784:Hospitals, Teaching / Q000191:economics*; D007396:Internship and Residency / Q000191:economics*; D006278:Medicare / Q000191:economics*; D017059:Models, Econometric; D011445:Prospective Payment System / Q000191:economics*; D012044:Regression Analysis; D014146:Training Support / Q000191:economics*; D014481:United States