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Medicare prospective payment and the use of medical technologies in hospitals
F A Sloan1, M A Morrisey, J Valvona
1Department of Economics, Vanderbilt University, Nashville, TN 37235.
Abstract:
Medicare's Prospective Payment System (PPS) created incentives to reduce the application of technology to hospitalized Medicare beneficiaries. Using data from 501 hospitals from 1980 and 1983-85, this study assesses changes in use of intensive care units and use of nonsurgical procedures before versus after implementation of PPS. The percent of hospitalized patients, both Medicare and non-Medicare, admitted to intensive care units increased post-PPS. Also, stays within such units remained constant. However, the percent of inpatients to whom several nonsurgical procedures were administered was lower post-PPS. For some (e.g., CAT scanning), the percentage of inpatients having the procedure continued to increase after PPS but at a much slower rate. For others, the percent of inpatients with the procedure declined at a faster rate (e.g., intravenous pyelogram). Still others showed utilization increases during 1980-83 followed by declines thereafter (e.g., occupational and physical therapy). Before 1983, there was almost no change in the number of routine tests per inpatient (e.g., serology and blood chemistry). Afterwards, there were major decreases. PPS has influenced the inhospital use of many nonsurgical procedures by both Medicare and non-Medicare patients.
Insights
The Medicare Prospective Payment System (PPS) influenced hospital technology use. Post-PPS, intensive care unit admissions rose, but use of many nonsurgical procedures decreased for Medicare and non-Medicare patients.
Area of Science:
- Health Economics
- Hospital Administration
- Medical Technology Assessment
Background:
- The Medicare Prospective Payment System (PPS) was implemented to control healthcare costs.
- PPS created financial incentives that could alter the utilization of medical technologies and procedures in hospitals.
Purpose of the Study:
- To assess the impact of Medicare's Prospective Payment System (PPS) on the use of intensive care units (ICUs) and nonsurgical procedures.
- To compare technology and procedure utilization before and after PPS implementation.
Main Methods:
- Analysis of data from 501 hospitals.
- Comparison of patient data from 1980 (pre-PPS) and 1983-85 (post-PPS).
- Examination of trends in intensive care unit admissions and nonsurgical procedure use.
Main Results:
- Intensive care unit admissions increased for both Medicare and non-Medicare patients post-PPS, with constant length of stay.
- Utilization of several nonsurgical procedures, such as CAT scans and intravenous pyelograms, decreased or slowed post-PPS.
- Routine diagnostic tests and therapy services showed decreased utilization after 1983.
Conclusions:
- Medicare's PPS significantly influenced the in-hospital use of numerous nonsurgical procedures.
- The system impacted technology adoption and utilization patterns for both Medicare and non-Medicare beneficiaries.
- PPS financial incentives appear to have led to reduced application of certain medical technologies and procedures.