Payment rates in Medicare's Prospective Payment System (PPS) are based on averages of historical hospital costs. Compared to reimbursing each hospital's own costs, pricing at the average of costs implies a massive redistribution of payments among hospitals. Because not all sources of hospital costs are accounted for in the PPS, some of this redistribution is ‘unfair’. Information in hospital-specific costs on unmeasured patient severity and input prices can be exploited to reduce payment inequities. However, fully hospital-specific rates are not optimal because costs also reflect treatment intensity and efficiency differences among hospitals.
Using hospital-specific costs to improve the fairness of prospective reimbursement
Pope, G. (1990). Using hospital-specific costs to improve the fairness of prospective reimbursement. Journal of Health Economics, 9(3), 237-251. https://doi.org/10.1016/0167-6296(90)90045-5
Abstract
Publications Info
To contact an RTI author, request a report, or for additional information about publications by our experts, send us your request.
Meet the Experts
View All ExpertsRecent Publications
Article
The daily association between affect and alcohol use: A meta-analysis of individual participant data
Article
Protection of forest ecosystems in the eastern United States from elevated atmospheric deposition of sulfur and nitrogen
Article
The use of patient experience feedback in rehabilitation quality improvement and codesign activities
Article