Commercial insurers and all-payer regulation. Evidence on hospitals' responses to financial need.

This study explores commercial insurers' claims about cost-shifting in the broader context of hospitals' responses to revenue needs. It relies on hospital survey data from 1980 and 1982, a period that pre-dates Medicare's Prospective Payment System (PPS) for hospitals. While we find that limited amounts of cost-shifting occur, evidence does not support the notion that it is a perfect safety valve to control financial status. In addition, all-payer rate-setting does not appear to be related to hospitals' ability to shift costs. Instead, inpatient rate controls cause hospitals to contain costs, seek greater outpatient revenues and accept lower margins. Are the financial 'stresses' associated with PPS sufficient enough to kick off renewed concerns about cost-shifting? Some aggregate data from the PPS-era indicates that lower growth in Medicare payments has not resulted in cost-shifting on a widespread basis.