Implications of global budget payment system on nursing home costs

Pressure on health care systems due to the increasing expenditures of the elderly population is pushing policy makers to adopt new regulation and payment schemes for nursing home services. We consider the behavior of nonprofit nursing homes under different payment schemes and empirically investigate the implications of prospective payments on nursing home costs under tightly regulated quality aspects. To evaluate the impact of the policy change introduced in 2006 in Southern Switzerland - from retrospective to prospective payment - we use a panel of 41 homes observed over a 10-years period (2001-2010). We employ a fixed effects model with a time trend that is allowed to change after the policy reform. There is evidence that the new payment system slightly reduces costs without impacting quality.