Prospective Payment System Evaluation Studies-Did the Prospective Payment System Compress Variation in Hospital Length of Stay and Cost per Discharge

摘要

The Diagnosis Related Group rates of Medicare's Prospective Payment System (PPS) are fundamentally based on pre-PPS average hospital costs, an expected effect of PPS is a reduction in the variation among hospitals in cost per discharge and length-of-stay (LOS). Whether a compression occurred in the first three years of PPS is tested in the paper. The analysis is organized as follows: Section 2 establishes expectations about the effect of PPS on the distribution of hospital LOS and cost per discharge. Section 3 refers to the data used in the analysis. The methodological basis for the empirical analysis is provided in Section 4. Section 5 analyzes changes in basic characteristics of distribution of LOS and costs between the Tax Equity and Fiscal Responsibility Act (1982) and the first three PPS years, changes in urban/rural and regional means of LOS and cost are examined within the context of over changes in variation. Section 6 uses analysis of variance techniques to determine whether the change in the variance of LOS and costs occurred primarily within area (Metropolitan Statistical Area, Census Division, Census Region) or between areas. Section 7 concludes the analysis with a summary of the results.