Do closed-system hospitals shift care under case payment? Early experiences comparing five surgeries in Taiwan

Background: Recently, Japan, Korea, and Taiwan have adopted prospective payment systems (PPS) for healthcare. Experiences of the United States Medicare show that PPS reduces length of stay but creates incentives to shift care from regulated to un-regulated settings. In this study we investigated whether closed-system hospitals in Taiwan responded to case payment (CP) - one type of PPS, and if so, how this was managed. Methods: Data were derived from three Taiwanese hospitals for five different surgical procedures (N = 22,327). The study period covered from October 1996 through August 1999, with CP commencing on October 1, 1997. Important dependent variables included inpatient medical claims, outpatient medical claims, and number of outpatient visits. Outpatient utilization from the period four weeks prior to admission and four weeks following discharge were merged for each patient. Ordinary Least Square (OLS) and Poisson regression were used to test the study's shifting hypotheses, controlling for gender, age, patient diagnoses, and institution attended. Results: Length of hospital stay, amount of inpatient claims, and inpatient x-ray and lab-test claims were significantly reduced after CP. Corresponding OLS coefficients for the second year of implementation were, respectively, -.86, -.06, -.15, and -.04 (p < 0.01). Significant forward shifting of outpatient care, (79%), was found during the second year of CP. Despite the care-shifting effects noted herein, the average per-capita total claims reduced by 12%. Significant institutional effects were associated with the pattern of care-shifting. Conclusions: Our results indicate that CP reduced total claims for the selected surgical procedures, even under evident forward care-shifting.