CHANGES IN RATES OF UNSCHEDULED HOSPITAL READMISSIONS AND CHANGES IN EFFICIENCY FOLLOWING THE INTRODUCTION OF THE MEDICARE PROSPECTIVE PAYMENT SYSTEM - AN ANALYSIS USING RISK-ADJUSTED DATA

The purpose of this study was to analyze changes in rates of unscheduled readmissions and changes in technical efficiency following the introduction of the Medicare Prospective Payment System (PPS). We developed the RiskAdjusted Readmissions Index (RARI), which allowed us to make comparisons in rates of unanticipated readmissions across hospitals and over time. Data envelopment analysis (DEA), a linear programming technique, was used to measure changes in technical efficiency by comparing the inputs used and the outputs produced across a cohort of hospitals, while adjusting for changes over time in case mix and case complexity. Rates of unscheduled readmissions and efficiency scores were computed for a sample of 245 hospitals for each year. Although both readmission rates and efficiency scores increased for most hospitals, there was no evidence that those hospitals that experienced the greatest increases in efficiency had the largest increases in their rates of unscheduled readmissions. © 1991, SAGE PUBLICATIONS, INC. All rights reserved.