M4: Provider payment incentives
17 important questions on M4: Provider payment incentives
Name four characteristics of base payment and Pay-for-performance. For two characteristics, think about their use/presence and relation to performance.
- Always present
- Not directly related to performance
- Vast majority of providers' revenues
- Various methods possible
Pay-for-performance:
- Can be used on top of base payment
- Directly related to performance
- Meaningful indicators necessary
- Many design options
Which two types of financial risk can be distinguished? And give an example of both:
- Insurance (probability) risk: Unexpected events. The chance of having a severe or less severe patient. It is a random event.
- e.g. People who get infected by a virus, someone who gets hit by a car.
- Often this is the case when something happens before you see the provider.
- Performance (technical) risk: The provider makes a mistake and therefore the patient has a lifelong injury or handicap.
- This could have been prevented. Thus, this is influenced by the provider.
Jegers et al. Makes a distinction based on unit of payment, which four categories do they describe?
- Per service (fee-for-service) or diem (patient-day)
- Per case/episode or condition (episode/bundled payment)
- Per enrolled person (capitation payment)
- Per period (salary/budget)
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Do prospective or retrospective systems stimulate cost containment?
And to what extent?
Draw the payment system & risk of Miller with the insurance risk and the performance risk:
Episode-of-care: performance risk
comprehensive care: performance risk
traditional capitation: performance & insurance risk
Utilization patterns of physicians are different and can be explained by physicians preferences and the nature of the work setting.
Which physicians (conservative/aggressive) prefer:
- To be salaried or paid FFS (payment method)?
- Work in a health centre or work independent (nature of the work-setting)?
What are three limitations of blended payment?
- Perverse incentives in pure base-payment methods only attenuated (not entirely eliminated).
- No combination available in which quality is explicitly stimulated (might be solved by P4P)
- Sophistication in provider payment design creates its own difficulties (complexity), with several effects in practice:
- Preference for simple over complex payment systems
- Nonfinancial schemes to complement payment incentives
- Increasing importance of organizatonial structures
What is a provider payment system?
Who are providers?
Distinction between Funding for operational costs of practice/organization (e.g. other staff, ORs, materials, drugs) Physician’s labor Both components are usually integrated for individual practitioners, but sometimes split for organizations
Give three reasons why financial incentives are relevant in HC
- They are always present (in any sector of the economy) and health care is not different
- Providers respond to financial incentives and can influence demand
- Providers do not always act as a perfect agent of patients
Given that some payment method must be devised and the providers’ ability and willingness to influence demand, a relevant question is ..?
Analysis of provider payment therefore falls within the larger economic literature on incentive contracts known as “agency theory” Give the characteristics of the agency theory (3X)
- Contractual transactions between 2 unequally informed parties
- Ill-informed principal delegates work to well-informed agent, while trying to induce certain behavior
- Financial incentives are just one among the many mechanisms for eliciting desired behavior
When does info asymmetry becomes problematic?
What are the limits of payment incentives and the three implications?
This has several implications:
Preference for simple over complex payment systems Reliance on nonfinancial schemes to complement payment incentives Increasing importance of organizational structures.
In which four ways can the payer influence location of risk via the payment system?
- Risk bearing: payer bears full risk
- Risk shifting: provider bears full risk (full capitation model, also insurance risk to provider)
- Risk splitting: first-best, but unfeasible because of large grey area
- Risk sharing: second-best, but feasible (still some insurance risk to provider)
Study Gosden et al. (2001) What are the conclusions about payment methods and physician behaviour?
method of payment influences physician behavior
FFS physicians do more than capitated or salaried physicians
Study Van Dijk et al. (2013) What is the study and what are the conclusions about payment methods and physician behavior?
< 2006: public and private insurance system
< 2006: capitation for public, FFS for private
≥ 2006: mix of capitation and FFS for all insured
Main finding: increase in GP-initiated visits 5% larger in formerly publicly insured
Study Douven et al. (2015) What is the study and what are the conclusions about payment methods and physician behavior?
Adjusted # treatments higher in areas with many FFS specialists than in areas with many salaried specialists
Overall: 1% increase in # specialists leads to:
0,40% increase in # treatments for FFS
0,15% increase in # treatments for salaried
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