Cost Models with Prominent Outliers

Cost Models with Prominent Outliers

Chakib Battioui (University of Louisville, USA)
DOI: 10.4018/978-1-61520-723-7.ch016
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Abstract

Government reimbursement programs, such as Medicare and Medicaid, generally pay hospitals less than the cost of caring for the people enrolled in these programs. For many patient conditions, Medicare and Medicaid pay hospitals a fixed amount based upon average cost for a procedure or treatment with local conditions taken into consideration. In addition, while the hospital provides the services, it has little control over the cost of delivery of that service, which is determined more by physician orders. The physician is under no real obligation to control those costs as the physician bills separately for services that are independent of orders charged. However, some patients who are severely ill will cost considerably more than average. This has caused providers to lose money. In this study, we investigate the reimbursement policies and the assumptions that have been made to create these reimbursement policies.

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