Rate Regulation as a Strategy for Hospital Cost Control: Evidence from the Last Decade

摘要

This study assesses the effects of rate regulation as an approach for containing the rise in spending for hospital care. The data set for the empirical analysis, which builds on past research on the topic, is a time series of state cross sections spanning the years 1963 through 1980. Analysis of the data shows that mandatory rate regulation programs, which require hospital compliance with decisions of a public agency and implemented by a few states in the 1970s, have been the only approach to succeed in controlling hospital costs. Neither state-mandated programs which do not require hospitals to abide by agency decisions nor private sector rate regulation programs have reduced the rate of hospital cost inflation. A number of reasons for the unique success of the first set of mandatory programs are explored. Future cost containment programs should build on the rate regulation concept. Modifications of this general approach are briefly evaluated.