Spending the Night? Provider Incentives, Medical Treatment and Patient Health

Healthcare payment polices have consequences for both fiscal spending and patient health, yet little attention is paid to the study of provider incentives. This paper studies hospital responses to financial incentives by exploiting a change in the remuneration scheme for hospitals in Norway. A 2010-policy change substantially reduced the reimbursement rate for stays wherein patients are discharged on the day of admission, while concurrently introducing an additional reimbursement at the second day after admission. This gives hospitals incentives to (i) reduce the admission of less profitable patients, or (ii) shift patients from one-day stays to two-day stays, thereby earning on average 1100USD more per patient.

I find no evidence that price changes affect the admission of patients, or the share of patients staying at least two days. The shifting of patients into longer stays does not appear to be capacity constrained. Finally, I find no discernible effects on patient health.

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