Prospective payments and hospital efficiency

Academic Article


  • This paper examines the effects of the Prospective Payment System on the behavior of hospitals with respect to their capital allocations and the efficiency with which they produce in-patient care. A theoretical model adapted from Pope [1989] yields the testable hypotheses that as a hospital's Medicare population increases the hospital will supply greater levels of capital and produce in-patient care using less technically efficient methods. A two stage test of these hypotheses is run on a sample of US non-federal hospitals. Results from patient demand functions and a stochastic profit frontier are consistent with the theoretical model.
  • Authors

  • Plante, Catherine
  • David Bradford, W
  • Craycraft, Catherine
  • Status

    Publication Date

  • December 1996
  • Has Subject Area

    Published In

    Digital Object Identifier (doi)

    Start Page

  • 791
  • End Page

  • 809
  • Volume

  • 11
  • Issue

  • 6