The Effect of Medicare's Payment System for Rehabilitation Hospitals on Length of Stay, Charges, and Total Payments

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Abstract
Medicare's system for the payment of rehabilitation hospitals is based on limits derived from a hospital's average allowable charges per patient discharged during a base year. Thereafter, payments are capped, but hospitals receive incentive payments if charges per patient are reduced in succeeding years. We hypothesized that per-patient charges would increase during the base year and then decrease in subsequent years. Hospitals would thus have higher reimbursement limits and receive incentive payments for reducing their charges.