Effects of Hospital Exemption from the Prospective Payment System

Abstract

In this chapter, we focus on the decision of hospitals with psychiatric units to seek exemption for their units. We compare hospitals that became exempt from PPS to those that did not. We look for possible reasons for the decision to choose exemption and its eventual effects. In order to look at effects of choosing to become exempt, it was necessary to arrive at a means for comparing the exempt or nonexempt hospitals from the 1985 data to similar hospitals in the 1980 data when exemption was not an issue. Confidentiality keeps us from identifying hospitals in the 1980 survey that subsequently became exempt. Therefore we developed a technique to identify hospitals in 1980 similar to those ultimately becoming exempt by 1985. Because exemption is a hospital-level decision, all analyses were performed with the hospital as the unit of analysis.