This study investigates the capacity of hospitals to vary the intensity of their services based on patients' expected sources of payment. While the concept of price discrimination by hospitals based on payer generosity ("cost-shifting") has been discussed extensively, the notion that hospitals can adjust payer-specific marginal costs to reflect differences in reimbursement policies has not been studied in depth. To examine this issue.
International Journal of Health Care Finance and Economics
This study provides (a) new estimates of U.S. hospital profitability by payer group, controlling for hospital characteristics, and (b) evidence about the intensity of care for particular diseases associated with the generosity of the patient's payer and other payers at the same hospital. The conceptual framework is a variant of the well-known model of a local monopolist selling in a segmented market. Effects of two kinds of regulation are considered.
BACKGROUND: Previous studies have documented that hospitals decrease costs in response to reimbursement cutbacks. However, research concerning how this may affect quality of care has produced mixed results. Until recently, the ability to study changes in patient safety and payment has been limited. OBJECTIVE: The objective of the study was to determine whether changes in 4 hospital patient safety indicator (PSI) rates are related to changes in the generosity of payers over time.