Evaluating financial risk in the Medicare Prospective Payment System

Maqbool Dada, William D. White

Research output: Contribution to journalArticle

Abstract

The Medicare Prospective Payment System (PPS) is analogous to an insurance scheme in which financial risk is mitigated through experience rating. In addition, risk is also mitigated through reinsurance provisions. Although a provider may not want this reinsurance, participation is mandatory. We develop a framework for evaluating financial risk under the PPS. We use this framework to examine optional reinsurance as an alternative risk mitigation mechanism. We illustrate an application of optional reinsurance using data for Medicare psychiatric inpatient services. Our analysis indicates that viable schemes exist for implementing optional reinsurance as a prospective payment option.

Original languageEnglish (US)
Pages (from-to)316-329
Number of pages14
JournalManagement Science
Volume45
Issue number3
StatePublished - Mar 1999
Externally publishedYes

Fingerprint

Insurance
Prospective payment system
Financial risk
Medicare
Reinsurance
Psychiatry
Prospective payment
Participation
Inpatients
Risk mitigation
Experience rating

ASJC Scopus subject areas

  • Management of Technology and Innovation
  • Strategy and Management
  • Management Science and Operations Research

Cite this

Evaluating financial risk in the Medicare Prospective Payment System. / Dada, Maqbool; White, William D.

In: Management Science, Vol. 45, No. 3, 03.1999, p. 316-329.

Research output: Contribution to journalArticle

Dada, Maqbool ; White, William D. / Evaluating financial risk in the Medicare Prospective Payment System. In: Management Science. 1999 ; Vol. 45, No. 3. pp. 316-329.
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