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Long-Term Care Hospital Responses toward Change in Payment System in Korea
The Korean National Health Insurance Services (NHIS) changed reimbursement system to long-term care hospitals (LTCH) from fee-for-services (FFS) to Per diem payment in 2008 to reduce excessive utilization of services and health care costs for LTCHs patients who need extended hospital-level care.
Objective
This paper examines how LTCHs respond to new incentives from Per diem payment system compared with previous FFS and magnitude of change by payment system change in terms of treatment intensity and patient selection.
Method
I use restricted hospital panel data constructed by the Ministry of Health and Welfare and Korean National Health Insurance Cohort Database to identify hospital-level and individual-level LTCH utilization before and after the introduction of new payment system. I exclude outpatient cases and only focused on inpatient cases.
1) Treatment Intensity
To identify changes in treatment intensity of hospital, I examine 1) lengths-of-stay (LOS) for patients subject to Per diem payment and 2) number of treatment processes for patients whose LOS is less than seven days and still subject to FFS after the payment system change.
2) Social Hospitalization and Patients Selection
Per diem payment creates incentives for LTCH to admit mild case patients or patients who don't need medical treatment (social hospitalization) because those patients are more profitable under new payment system. To identify this possible distortion, I classify inpatinet cases which can be considered as social hospitalization and examine whether hospitals are more likely to admit these patients who are more profitable under the per diem payment (patient selection).
I utilize regression discontinuity (RD) and Differences-in-difference (DID) methods for identification.
Results
1) Lengths of Stay
On average, LOS increased by 7%. By health insurance coverage status, patients who are covered by Medical-aid are more likely to stay hospitalized longer even they don’t need to stay for medical care due to very low or none out-of-pocket payment. By patients' medical condition, mild-case patients are more likely to increase LOS.
2) Social Hospitalization and Patient Selection
Share of social hospitalization increases significantly after the introduction of per diem payment. Among patients who stay more than 180 days, the share of social hospitalization increases by 20%. Selection of patients with mild case is more significant among hospitals classified as low quality category according to hospital evaluation results.