Strategic patient discharge: The case of long-term care hospitals

Paul J. Eliason, Paul L.E. Grieco, Ryan C. McDevitt, James W. Roberts

Research output: Contribution to journalReview articlepeer-review

23 Scopus citations


Medicare's prospective payment system for long-term acute-care hospitals (LTCHs) provides modest reimbursements at the beginning of a patient's stay before jumping discontinuously to a large lump-sum payment after a prespecified number of days. We show that LTCHs respond to the financial incentives of this system by disproportionately discharging patients after they cross the large-payment threshold. We find this occurs more often at for-profit facilities, facilities acquired by leading LTCH chains, and facilities colocated with other hospitals. Using a dynamic structural model, we evaluate counterfactual payment policies that would provide substantial savings for Medicare.

Original languageEnglish (US)
Pages (from-to)3232-3265
Number of pages34
JournalAmerican Economic Review
Issue number11
StatePublished - Nov 2018

All Science Journal Classification (ASJC) codes

  • Economics and Econometrics


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