Hospitals Discharge Patients to Maximize Medicare Payments, Study Finds
by: Anna Wilde Mathews and Christopher Weaver
Jun 09, 2015
Click here to view the full article on WSJ.com
TOPICS: Health Economics
SUMMARY: New research in Health Affairs confirms a Wall Street Journal analysis that found a pattern of long-term-care facilities discharging patients at lucrative times.
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) What is the evidence that long-term-care hospitals are responding to the financial incentives in their discharge decisions? Is this evidence refutable?
2. (Advanced) What is the principal-agent problem with hidden information? Is the case described in the article one of these problems?
3. (Advanced) Should Medicare use a step function (i.e., payment thresholds) to determine hospital reimbursements?
Reviewed By: James Dearden, Lehigh University
Rational Actor Paradigm, Incentives
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