https://dx.doi.org/10.1007/BF00174407">
 

Title

Prospective Payments and Hospital Efficiency

Abstract

This paper examines the effects of the Prospective Payment System on the behavior of hospitals with respect to their capital allocations and the efficiency with which they produce in-patient care. A theoretical model adapted from Pope [1989] yields the testable hypotheses that as a hospital's Medicare population increases the hospital will supply greater levels of capital and produce in-patient care using less technically efficient methods. A two stage test of these hypotheses is run on a sample of US non-federal hospitals. Results from patient demand functions and a stochastic profit frontier are consistent with the theoretical model.

Publication Date

12-1-1996

Journal Title

Review of Industrial Organization

Publisher

Springer

Digital Object Identifier (DOI)

https://dx.doi.org/10.1007/BF00174407

Document Type

Article

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