In response to the change in incentives of a payment system, hospitals may change treatment behaviors. In 2008, per diem prospective payment system(PPS) was adopted for long-term care hospitals(LTCHs), which was intended to deter the medical care expenditure growth. This study identifies economic incentives of the PPS and investigates how the PPS affects the treatment intensity and types of patients of LTCHs using LTCH admissions dataset. Results indicate that the length-of-stay(LOS) per discharge increases, while average daily payment decreases. The change in the LOS varies by characteristics of illness and the LOS increases more among the low-severity patients. The probability of admissions for low-severity patients also increases. This suggests that patient selection may occur within the hospital because of insufficient differences in the payment level by severity of illness. The intensity for fee-for-services(FFS) applied treatment increases which suggest that spillover effects exist from the PPS adoption. The economic incentives of the PPS induce these unexpected and distorted utilizations of LTCHs. It is necessary to redesign payment system to offer economic incentives to strengthen medical functioning of LTCHs.

Preface
Executive Summary

Chapter 1 Introduction

Chapter 2 Payment System and Hospital Provision of Medical Services
　Section 1 Medical Payment Systems
　Section 2 Hospital Service Provision Model

Chapter 3 Status of Long-Term Care Hospitals and Related Policies
　Section 1 Overview of Long-Term Care Hospitals and Their Role in the Elderly Care System
　Section 2 Payment System for Long-Term Care Hospitals
　Section 3 Out-of-Pocket Maximum

Chapter 4 Empirical Analysis
　Section 1 Data for Analysis
　Section 2 Analysis of Changes in Medical Practices for Long-Term Care Hospital Inpatients
　Section 3 Analysis of Patient Selection by Hospitals
　Section 4 Analysis of Medical Practices for Fee-for-Service Patients
　Section 5 Survival Analysis

Chapter 5 Conclusion and Policy Implications

References
Appendix
ABSTRACT