A hospital's decision-making behavior in the treatment of psychiatric and rehabilitation patients under Medicare's two-tier payment system
Abstract
Under Medicare's "two-tier" payment system, general hospitals with a PPS-exempt psychiatric or rehabilitation unit are paid on a daily basis for some psychiatric and rehabilitation patients, according to Tax Equity and Fiscal Responsibility Act (TEFRA) rules, and on a per case basis for others, according to the DRG-based prospective payment system (PPS). The type of payment depends on whether the hospital treats a psychiatric or rehabilitation patient in the unit or in a medical/surgical bed. This paper models three important decisions that a hospital makes under this payment system: (1) whether to apply for exemption from PPS for its distinct part unit; (2) whether to admit a patient into a general medical/surgical bed or a unit bed according to the potential profit; and (3) what quantity and quality of services to provide to patients. The models enable us to test hypotheses regarding the impact of reimbursement, hospital competition and the ownership status on a hospital's decisions. The empirical results show that (1) hospital decisions are strongly influenced by financial incentives; (2) hospital competition plays an important role in offsetting a hospital's incentives to reduce services; and (3) non-profit hospitals are less responsive to PPS incentives than for-profit hospitals.
Subject Area
Business community|Management|Economics|Health care
Recommended Citation
Yin, Dongping, "A hospital's decision-making behavior in the treatment of psychiatric and rehabilitation patients under Medicare's two-tier payment system" (1993). Dissertations available from ProQuest. AAI9331863.
https://repository.upenn.edu/dissertations/AAI9331863