THE IMPACT OF THE MEDICARE HOSPICE BENEFIT ON HOSPICES

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The proposed project will investigate the dynamics of the hospice industry and how its development has been affected by the Medicare Hospice Benefit. By combining data from the Health Care Financing Administration's Medicare Hospice Benefit Program Evaluation and the National Hospice Organization's National Hospice Census, the following three questions regarding hospice care and the Benefit will be addressed: 1) How much of the observed growth in average patient census for hospices is attributable to government intervention via the Medicare Hospice Benefit? 2) Has the Benefit led to a dichotomy in operating strategies across hospices? 3) How do responses to the Benefit vary across hospice types? Answers to the above questions will be sought using descriptive statistics, and through construction and estimation of an econometric model of the hospice industry. The descriptive statistics will be used to determine whether Medicare certified hospices experience more growth in patient census before or after certification, and whether certified hospices grow faster than non-certified ones. The econometric model will be used to test hypotheses such as: a) Does a significant quantity/quality tradeoff exist in hospice care, so that hospices must choose between providing relatively high quality care to a small number of patients, and serving a large number of patients with relatively lower quality care per patient? b) What measures of case mix significantly affect hospices' operating costs, and do these measures vary by certification status? c) How important are factors such as operating experience, hospice size, and hospice type in a hospice's certification decision? Building this model calls for the specification of equations that explain the certification decision of a hospice, the cost parameters it faces, and its growth in patient census over time. Estimation requires the use of generalized least squares for the cost function, and maximum likelihood techniques for the equation modelling time until certification.