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Theoretical Analysis of Hospitals Response to a Per Diem Prospective Payment System

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Authors
Dmitry Shapiro
Issue Date
2021-05
Publisher
Institute of Economic Research, Seoul National University
Citation
Seoul Journal of Economics, Vol.34 No.2, pp. 171-202
Keywords
Health care financingProspective payment systemper-diem ratelength of stayreadmission rate
Abstract
Japan has one of the longest average length of stay in hospital (ALOS) among developed countries. To curb the high ALOS, the Ministry of Health, Labor and Welfare has launched a payment system reform where instead of the pre-reform fee-for-service system (FFS) a new per-diem prospective payment system (DPC/PDPS) has been gradually adopted. We develop a theoretical framework to model hospitals incentives under different payment systems and to study the impact of the reform on the ALOS. We show that hospitals with a longer (shorter) pre-reform ALOS shorten (lengthen) their post-reform ALOS. Furthermore, hospitals with longer prereform ALOS have stronger incentives to use planned readmission to decrease the post-reform length of stay associated with a single admission. The theoretical predictions of our model match empirical evidence from the literature.
ISSN
1225-0279
Language
English
URI
https://hdl.handle.net/10371/174530
DOI
https://doi.org/10.22904/sje.2021.34.2.002
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College of Social Sciences (사회과학대학)Institute of Economics Research (경제연구소)Seoul Journal of EconomicsSeoul Journal of Economics vol.34 no.1~4 (2021)
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