Supplier-Induced Demand for Newborn Treatment: Evidence from Japan
43 Pages Posted: 13 Nov 2012 Last revised: 10 Mar 2014
Date Written: March 9, 2014
We estimate the degree of supplier-induced demand for newborn treatment by exploiting changes in reimbursement arising from the introduction of the partial prospective payment system (PPS) in Japan. Under the partial PPS, neonatal intensive care unit (NICU) utilization became relatively more profitable than other procedures, since it was excluded from prospective payments. We find that hospitals have responded to PPS adoption by increasing NICU utilization and by more frequently manipulating infants’ reported birth weights which in large part determine their maximum allowable stay in the NICU. This induced demand substantially increases the reimbursements received by hospitals.
Keywords: Supplier-Induced Demand, Neonatal Intensive Care Unit, Prospective Payment System, Birth Weight, Hospital Gaming
JEL Classification: I10, H51, L20
Suggested Citation: Suggested Citation