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New Study Looks at Medicare Payment Changes

In a new study, “Hospital Responses to Medicare’s Outpatient Prospective Payment System: Evidence from Florida,” forthcoming in the Journal of Health Economics, vol. 31, issue 4 (September 2012), Daifeng He and Jennifer M. Mellor examine the effect of Medicare’s Outpatient Prospective Payment System (OPPS) on hospital outpatient volume.  Effective August 1, 2000, the Outpatient Prospective Payment System (OPPS) greatly changed the way hospitals were reimbursed for outpatient services provided to Medicare beneficiaries. This research makes an important contribution to the literature on prospective payment systems by examining the effect of OPPS and by examining both Medicare hospital volume and private-payer volume resulting from OPPS-induced rate cuts.

Prior to He and Mellor’s study, little was known about the impacts of OPPS on outpatient utilization, even though the use of prospective payment systems had been studied widely in inpatient and several other healthcare delivery settings.  Policies and programmatic changes that affect outpatient utilization among Medicare and private payers are of significant interest to policy makers, particularly since outpatient spending continues to grow. 

This study was funded by a Changes in Health Care Financing and Organization grant from the Robert Wood Johnson Foundation which supports research, policy analysis, and evaluation projects that provide policy leaders timely information on healthcare policy.

A research brief summarizing “Hospital Responses to Medicare’s Outpatient Prospective Payment System: Evidence from Florida” can be found in Research and Publications on the Schroeder Center website.