• Yu-Chu Shen and Vivian Y Wu.
• *Graduate School of Business and Public Policy, Naval Postgraduate School, Monterey, CA †National Bureau of Economic Research, Cambridge, MA ‡Sol Price School of Public Policy, University of Southern California, Los Angeles, CA.
• Med Care. 2013 Nov 1; 51 (11): 970-7.

BackgroundThe Affordable Care Act enacted significant Medicare payment reductions to providers, yet the effects of such major reductions on patients remain unclear. We used the Balanced Budget Act (BBA) of 1997 as a natural experiment to study the long-term consequence of major payment reductions on patient outcomes.ObjectivesTo analyze whether mortality trends diverge over the years between hospitals facing different levels of payment cuts because of the BBA for 5 leading conditions: acute myocardial infarction, congestive heart failure, stroke, pneumonia, and hip fracture.Research DesignUsing 100% Medicare claims between 1995 and 2005, hospital database, and published reports on BBA policy components, we compared changes in outcomes between hospitals facing small and large BBA payment reductions across 3 periods (pre-BBA, initial-BBA, and post-BBA) using instrumental variable hospital fixed-effects regression models.SettingAll general, acute, nonrural, short-stay hospitals in the United States 1995-2005.Main Outcome MeasuresHospital risk-adjusted mortality rates (7, 30, 90 d, and 1 y).ResultsMortality trends between hospitals in small and large payment-cut categories were similar between pre-BBA and initial-BBA periods, but diverged in the post-BBA period. Relative to the small-cut hospitals, hospitals in the large-cut category experienced smaller decline in 1-year mortality rates in the post-BBA period compared with their pre-BBA trends by 0.8-1.4 percentage points, depending on the condition (P<0.05 for all conditions, except for hip fracture).ConclusionWe found consistent evidence across multiple conditions that reductions in Medicare payments are associated with slower improvement in mortality outcomes.

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