Medicare Payment Advisory Commission Unhappy Hospitals Respond To Financial Incentives

Economists understand that financial incentives matter and that people and entities, even hospitals and doctors, respond to those incentives. Unfortunately, government, legislators, regulators, advisors, the mainstream news media and the general public seem to always be either surprised, dismayed or in denial that money influences behavior.

From The Wall Street Journal, "Medicare Panel Faults Payment Fix as Too Weak: Seeks to change financial incentives on hospital discharges" by Christopher Weaver, Anna Wilde Mathews and Tom Mcginty:

Long-term-care hospitals get smaller payments for short visits, but after patients stay for a certain number of days the payments jump to much larger lump sums.

That gives the hospitals "a strong financial incentive to keep patients" until they qualify for higher payments, "and they appear to respond to that incentive," the Medicare Payment Advisory Commission, called MedPAC, said in a report Friday.
***Mark Miller, MedPAC’s executive director, said in an interview that the commission’s aim is “to get decisions made on the best clinical basis for the patient and not have practice patterns and discharge decisions driven by purely financial incentives.” The panel said Medicare could act to remove that incentive by eliminating the profitable jump in payments to the hospitals.

Source: The Wall Street Journal