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Supplier-induced Demand in Newborn Treatment: Evidence from Japan
Hitoshi Shigeoka, Assistant Professor at Simon Fraser University
We measure the degree of supplier-induced demand in newborn treatment, by exploiting changes in reimbursement arising from the introduction in Japan of the partial prospective payment system (PPS). Under the partial PPS, neonatal intensive care unit (NICU) utilization became relatively more profitable than other procedures, since it was excluded from prospective payments. We find that hospitals respond to PPS adoption by increasing NICU utilization and more frequently manipulating infants' reported birth weights -- the latter of which is a measure that determines the infant's maximum allowable length of stay in NICU. This induced demand substantially increases hospitals' reimbursements.
Wednesday, February 12, 2014 | 12:00 pm — 1:30 pm