Hospital Cost and Efficiency Under Per Service and Per Case Payment in Maryland: a Tale of the Carrot and the Stick

36 Pages Posted: 28 May 2004 Last revised: 1 Feb 2010

See all articles by David S. Salkever

David S. Salkever

UMBC, Department of Public Policy

Donald M. Steinwachs

Johns Hopkins University - Department of Health Policy and Management; National Bureau of Economic Research (NBER)

Agnes Rupp

Government of the United States of America - Division of Services and Intervention Research; National Bureau of Economic Research (NBER)

Date Written: June 1985

Abstract

The simultaneous operation of per case and per servicepayment systems in Maryland, and the varying levels of stringency used in setting per case rates allows comparison of effects of differing incentive structures on hospital costs. This paper presents such a comparison with 1977-1981 data. Cost per case and total cost regressions show evidence of lower costs only when per case payment limits are very stringent. Positive net revenue incentives appear insufficient to induce reductions in length of stay and in ancillary services use. Our results suggest these changes in medical practice patterns are more likely under the threat of financial losses.

Suggested Citation

Salkever, David S. and Steinwachs, Donald M. and Rupp, Agnes, Hospital Cost and Efficiency Under Per Service and Per Case Payment in Maryland: a Tale of the Carrot and the Stick (June 1985). NBER Working Paper No. w1633. Available at SSRN: https://ssrn.com/abstract=238160

David S. Salkever (Contact Author)

UMBC, Department of Public Policy ( email )

1000 Hilltop Circle
Baltimore, MD 21250

Donald M. Steinwachs

Johns Hopkins University - Department of Health Policy and Management

624 North Broadway
Baltimore, MD 21205

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

Agnes Rupp

Government of the United States of America - Division of Services and Intervention Research ( email )

6001 Executive Blvd.
Bethesda, MD 20892
United States
(301) 443-3364 (Phone)
(301) 443-4045 (Fax)

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

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