Abstract
This paper explores how the new financial incentives and organizational structures that prevail in the hospital industry have affected the mix of services provided by hospitals. Using data from the Agency for Health Care Policy and Research's Healthcare Cost and Utilization Project, the authors studied the 150 procedures that were most frequently performed on inpatients in 1980. They found that (a) 37 of the 150 procedures declined in use more than 40 percent by 1987, (b) patients that continued to receive one of the 37 procedures in 1987 on an inpatient basis tended to be more severely ill than in 1980, and (c) rates of decline were disproportionately large for Medicaid recipients. Three main factors have contributed to the decline in inpatient use of these procedures. Most important has been the shift from inpatient to outpatient settings, a result of new technologies and pressures from reimbursement mechanisms and utilization review policies. Some procedures have been replaced by less invasive, more effective approaches. Other procedures are now considered ineffective by the medical community and have been largely abandoned as a result.
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