Jan 1, 1988
To limit the risk to hospital finances associated with extremely long or expensive patient stays, Medicare supplements the predetermined payments of its Prospective Payment System with outlier payments. However, because outlier cases still cause losses, hospitals have incentives to discourage admissions of potential outliers if these cases can be identified prior to admission. The study reported in this Note used patient characteristics (demographics, chronic disease conditions, number of diseased body systems, and prior hospitalizations) to describe the 5 percent of cases with the largest losses, the 5 percent of longest stays within each diagnosis-related group, and a measure of accounting profit for the case. The Note describes multivariate models of patient characteristics, compares long-stay cases with extreme-loss cases, and discusses the relationship between the hospital and patient characteristics. Finally, it relates the results of the analysis to policy concerns.