Does prospective payment encourage nursing home efficiency?

The health-care field is increasingly sensitive to the effect of third-party reimbursement policies on health-care organization performance. The ability to attain low costs and high net income, for example, is particularly affected by prospective reimbursement. Theoretically, prospective payments should provide an incentive to health-care organizations to implement better control over performance. These ideas are examined in a study of nursing homes. Results of this analysis indicate that management control practices contribute to efficient performance. The association of this finding with prospective reimbursement is discussed from the perspective of implications for health-care organizations.