Analysis of hospital length of stay and discharge destination using hazard functions with unmeasured heterogeneity

The hospital length-of-stay and the discharge destination of a Medicare patient are the outcomes of one decision process involving the interests of the patient, the hospital, and the firms offering covered post-hospital care. We use a competing risk hazard estimation procedure and adjust for unobserved heterogeneity with a non-parametric technique to identify significant factors in the decision process. A patient's health and socio-economic characteristics, the availability of informal care, local market area conditions, and Medicare policies influence length-of-stay and discharge destination. The substitution we find between hospital and post-hospital care and among post-hospital care alternatives has policy implications for Medicare.