Factors Contributing to Variation in Medicare Inpatient Payment Ratios
This project will model the determinants of the Medicare inpatient payment-to-cost ratios as a method of evaluating the components of the inpatient PPS rate formula. Separate models of hospital payments and average costs will be estimated simultaneously to assess the performance of each part of the per-case payment formula relative to its intended objective within PPS. The study will evaluate the formula components across all participating hospitals as a group, then investigate them within key subgroups of hospitals that are known to be experiencing particular reimbursement difficulties or reimbursement advantages in order to target specific groups where policy interventions may be needed. Subgroups will be defined primarily by geographic region, including urban and rural, and by market characteristics. Differences by hospital size, levels of diversification, teaching status and ownership will also be investigated.
The models will be generated from PPS 15 (FY1998) cost report data, then replicated for data from FY 1992 and 1996. The objectives of multiple-year analyses are two-fold: first, to identify the effects of regulatory changes and payment updates on the payment margins; and second, to gain a better understanding of the influence of structural changes in the hospital industry as providers have responded to PPS and market incentives for more efficient production.
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