Hospital Discharges Rise at Lucrative Times
by: Christopher Weaver, Anna Wilde Mathews, and Tom McGinty
Feb 18, 2015
Click here to view the full article on WSJ.com
Click here to view the video on WSJ.com
by: Christopher Weaver, Anna Wilde Mathews, and Tom McGinty
Feb 18, 2015
Click here to view the full article on WSJ.com
Click here to view the video on WSJ.com
TOPICS: Health Economics
SUMMARY: Many long-term-hospital companies discharge a disproportionate share of Medicare patients during the few days when hospitals stand to make the most, an analysis of claims found.
CLASSROOM APPLICATION: Students can evaluate the effect of Medicare payment rules on hospital discharge decisions. Instructors can present the Medicare-hospital relationship as a principal-agent problem with hidden information (in which the hospitals have private information about the health status of patients).
QUESTIONS:
1. (Introductory) "Select said in a written statement that its long-term hospitals discharge patients 'based on their medical condition and not on the Medicare reimbursement system' and 'do not manipulate discharge timing based on financial considerations.' The company said bonuses are based on 'overall financial performance,' among other factors, and not the share of patients discharged near the threshold." Is overall financial performance affected by the timing of patient discharges? If so, do bonus-earning employees have a financial incentive in timing discharges?
2. (Advanced) Should Medicare use a step function (i.e., payment thresholds) to determine hospital reimbursements?
3. (Advanced) "If a patient was two days from the threshold, 'you were incentivized to see if you couldn't find a reason to keep them for two more days,' says Mr. Marquardt, who left the company in December to work as a consultant. Mr. Marquardt says he didn't believe the efforts caused harm. 'You might play the game a bit, but you would never put a patient at risk,' he says. Is this game a game in the game-theoretic sense? If so, who are the players? What actions are available to them and what is the sequence of play? What information does each player have?
4. (Advanced) For-profit companies such as Kindred and Select were more likely to discharge patients during the most-lucrative window than nonprofit competitors, the Journal's analysis shows. Why are for-profit hospitals more likely to discharge patients during the most-lucrative window?
5. (Advanced) What is the principal-agent problem with hidden information? Is the case described in the article one of these problems?
1. (Introductory) "Select said in a written statement that its long-term hospitals discharge patients 'based on their medical condition and not on the Medicare reimbursement system' and 'do not manipulate discharge timing based on financial considerations.' The company said bonuses are based on 'overall financial performance,' among other factors, and not the share of patients discharged near the threshold." Is overall financial performance affected by the timing of patient discharges? If so, do bonus-earning employees have a financial incentive in timing discharges?
2. (Advanced) Should Medicare use a step function (i.e., payment thresholds) to determine hospital reimbursements?
3. (Advanced) "If a patient was two days from the threshold, 'you were incentivized to see if you couldn't find a reason to keep them for two more days,' says Mr. Marquardt, who left the company in December to work as a consultant. Mr. Marquardt says he didn't believe the efforts caused harm. 'You might play the game a bit, but you would never put a patient at risk,' he says. Is this game a game in the game-theoretic sense? If so, who are the players? What actions are available to them and what is the sequence of play? What information does each player have?
4. (Advanced) For-profit companies such as Kindred and Select were more likely to discharge patients during the most-lucrative window than nonprofit competitors, the Journal's analysis shows. Why are for-profit hospitals more likely to discharge patients during the most-lucrative window?
5. (Advanced) What is the principal-agent problem with hidden information? Is the case described in the article one of these problems?
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