Testing the myth of fee-for-service and overprovision in health care

Looking inside the lab: a systematic literature review of economic experiments in health service provision

Experimental economics is, nowadays, a well-established approach to investigate agents' behavior under economic incentives. In the last decade, a fast-growing number of studies have focused on the application of experimental methodology to health policy issues. The results of that stream of literature have been intriguing and strongly policy oriented. However, those findings are scattered between different health-related topics, making it difficult to grasp the overall state-of-the-art. Hence, to make the main contributions understandable at a glance, we conduct a systematic literature review of laboratory experiments on the supply of health services. Of the 1248 articles retrieved from 2011, 56 articles published in peer-review journals have met our inclusion criteria. Thus, we have described the experimental designs of each of the selected papers and we have classified them according to their main area of interest.

Strategic behaviour and decision making in competitive hospital markets: an experimental investigation

We investigate quality provision and the occurrence of strategic behaviour in competitive hospital markets where providers are assumed to be semi-altruistic towards patients. For this, we employ a laboratory experiment with a hospital market framing. Subjects decide on the quality levels for one of three competing hospitals respectively. We vary the organizational aspect of whether quality decisions within hospitals are made by individuals or teams. Realized monetary patient benefits go to real patients outside the lab. In both settings, we find that degrees of cooperation quickly converge towards negative values, implying absence of collusion and patient centred or competitive quality choices. Moreover, hospitals treat quality as a strategic complement and adjust their quality choice in the same direction as their competitors. The response magnitude for team markets is weaker; this is driven by non-cooperative or altruistic teams, which tend to set levels of quality that are strategically independent.

The link between physician motivation and care

Studies report an unexplained variation in physicians' care. This variation may to some extent be explained by differences in their work motivation. However, empirical evidence on the link between physician motivation and care is scarce. We estimate the associations between different types of work motivation and care. Motivation is measured using validated questions from a nation-wide survey of Danish general practices and linked to high-quality register data on their care in 2019. Using a series of regression models, we find that more financially motivated practices generate more fee-for-services per patient, whereas practices characterised by greater altruistic motivation towards the patient serve a larger share of high-need patients and issue more prescriptions for antibiotics per patient. Practices with higher altruism towards society generate lower medication costs per patient and prescribe a higher rate of narrow-spectrum penicillin, thereby reducing the risk of antimicrobial resistance in the population. Together, our results suggest that practices' motivation is associated with several dimensions of healthcare, and that both their financial motivation and altruism towards patients and society play a role. Policymakers should, therefore, consider targeting all provider motivations when introducing organisational changes and incentive schemes; for example, by paying physicians to adhere to clinical guidelines, while at the same time clearly communicating the guidelines' value from both a patient and societal perspective.

A new look at physicians' responses to financial incentives: Quality of care, practice characteristics, and motivations

There is considerable controversy about what causes (in)effectiveness of physician performance pay in improving the quality of care. Using a behavioral experiment with German primary-care physicians, we study the incentive effect of performance pay on service provision and quality of care. To explore whether variations in quality are based on the incentive scheme and the interplay with physicians' real-world profit orientation and patient-regarding motivations, we link administrative data on practice characteristics and survey data on physicians' attitudes with experimental data. We find that, under performance pay, quality increases by about 7pp compared to baseline capitation. While the effect increases with the severity of illness, the bonus level does not significantly affect the quality of care. Data linkage indicates that primary-care physicians in high-profit practices provide a lower quality of care. Physicians' other-regarding motivations and attitudes are significant drivers of high treatment quality.

Who benefits from quality competition in health care? A theory and a laboratory experiment on the relevance of patient characteristics

We study how competition between physicians affects the provision of medical care. In our theoretical model, physicians are faced with a heterogeneous patient population, in which patients systematically vary with regard to both their responsiveness to the provided quality of care and their state of health. We test the behavioral predictions derived from this model in a controlled laboratory experiment. In line with the model, we observe that competition significantly improves patient benefits as long as patients are able to respond to the quality provided. For those patients, who are not able to choose a physician, competition even decreases the patient benefit compared to a situation without competition. This decrease is in contrast to our theoretical prediction implying no change in benefits for passive patients. Deviations from patient-optimal treatment are highest for passive patients in need of a low quantity of medical services. With repetition, both, the positive effects of competition for active patients as well as the negative effects of competition for passive patients become more pronounced. Our results imply that competition can not only improve but also worsen patient outcome and that patients' responsiveness to quality is decisive.

Comparison of Relative Value Units and 30-Day Outcomes Between Primary and Revision Pediatric Spinal Deformity Surgery

STUDY DESIGN

Retrospective cohort study.

OBJECTIVE

The aim of this study was to compare the relative value units (RVUs) and 30-day outcomes between primary and revision pediatric spinal deformity (PSD) surgery.

SUMMARY OF BACKGROUND DATA

PSD surgery is frequently complicated by the need for reoperation. However, there is limited literature on physician reimbursement rates and short-term outcomes following primary versus revision spinal deformity surgery in the pediatric population.

MATERIALS AND METHODS

This study utilizes data obtained from the American College of Surgeons National Surgical Quality Improvement Program (ACS-NSQIP) Pediatric database. Patients between 10 and 18 years of age who underwent posterior spinal deformity surgery between 2012 and 2018 were included. Univariate and multivariate regression were used to assess the independent impact of revision surgery on RVUs and postoperative outcomes, including 30-day readmission, reoperation, morbidity, and complications.

RESULTS

The study cohort included a total of 15,055 patients, with 358 patients who underwent revision surgery. Patients in the revision group were more likely to be younger and male sex. Revision surgery more commonly required osteotomy (13.7% vs. 8.3%, P =0.002).Univariate analysis revealed higher total RVUs (71.09 vs. 60.51, P <0.001), RVUs per minute (0.27 vs. 0.23, P <0.001), readmission rate (6.7% vs. 4.0%, P =0.012), and reoperation rate (7.5% vs. 3.3%, P <0.001) for the revision surgery group. Morbidity rates were found to be statistically similar. In addition, deep surgical site infection, pulmonary embolism, and urinary tract infection were more common in the revision group. After controlling for baseline differences in multivariate regression, the differences in total RVUs, RVUs per minute, reoperation rate, and rate of pulmonary embolism between primary and revision surgery remained statistically significant.

CONCLUSIONS

Revision PSD surgery was found to be assigned appropriately higher mean total RVUs and RVUs per minute corresponding to the higher operative complexity compared with primary surgery. Revision surgery was also associated with poorer 30-day outcomes, including higher frequencies of reoperation and pulmonary embolism.

LEVEL OF EVIDENCE

Level III.

The formation of physician altruism

We study how patient-regarding altruism is formed by medical education. We elicit and structurally estimate altruistic preferences using experimental data from a large sample of medical students (N = 733) in Germany at different progress stages in their studies. The estimates reveal substantial heterogeneity in altruistic preferences of medical students. Patient-regarding altruism is highest for freshmen, significantly declines for students in the course of medical studies, and tends to increase again for last year students, who assist in clinical practice. Also, patient-regarding altruism is higher for females and positively associated to general altruism. Altruistic medical students have gained prior practical experience in healthcare, have lower income expectations, and are more likely to choose surgery and pediatrics as their preferred specialty.

Advancing universal health coverage in the COVID-19 era: an assessment of public health services technical efficiency and applied cost allocation in Cambodia

BACKGROUND

Achieving universal health coverage (UHC) is a global priority and a keystone element of the 2030 Sustainable Development Goals. However, COVID-19 is causing serious impacts on tax revenue and many countries are facing constraints to new investment in health. To advance UHC progress, countries can also focus on improving health system technical efficiency to maximize the service outputs given the current health financing levels.

METHODS

This study assesses Cambodia's public health services technical efficiency, unit costs, and utilization rates to quantify the extent to which current health financing can accommodate the expansion of social health protection coverage. This study employs Data Envelopment Analysis (DEA), truncated regression, and pioneers the application of DEA Aumann-Shapley applied cost allocation to the health sector, enabling unit cost estimation for the major social health insurance payment categories.

RESULTS

Overall, for the public health system to be fully efficient output would need to increase by 34 and 73% for hospitals and health centers, respectively. We find public sector service quality, private sector providers, and non-discretionary financing to be statistically significant factors affecting technical efficiency. We estimate there is potential supply-side 'service space' to expand population coverage to an additional 4.69 million social health insurance beneficiaries with existing financing if the public health system were fully efficient.

CONCLUSIONS

Public health service efficiency in Cambodia can be improved by increasing utilization of cost-effective services. This can be achieved by enrolling more beneficiaries into the social health insurance schemes with current supply-side financing levels. Other factors that can lead to increased efficiency are improving health service quality, regulating private sector providers, focusing on discretionary health financing, and incentivizing a referral system.

Bad to All? A Novel Way to Analyze the Effects of Fee-for-Service on Multiple Grades Hospitals Operation Outcomes

It is a consensus that Fee-for-Service (FFS) is a traditional medical insurance payment scheme with significant disadvantages, namely the waste of health care resources. However, the majority of the prior works that draw such conclusions from the perspective of social welfare while analyzing the impacts of FFS on operation outcomes of hospitals still lack attention from the existing literature, considering the fact that the majority of public hospitals are self-founding. Under this motivation, we collected operation data of 301 public hospitals with different grades (grade II and III) in central China. Here, we present a novel statistical evaluation framework on the impact of FFS on hospital operation outcomes from four dimensions (financial income, efficiency, medical service capacity, and sustainability) using fixed-effects multivariate regression. With verification by the robustness test, our results indicate that: (i) The classification of the hospital (COH) significantly affected the impacts of FFS on hospitals’ operations. (ii) For grade III hospitals, FFS leads to higher financial income, medical service capacity (MSC) and longer length-of-stay (LOS). (iii) However, as for grade II hospitals, hospitals with FFS adoptions achieve lower financial income, lower MSC and shorter LOS, which violates the common sense from previous works. (iv) FFS has a significant negative impact on public hospital’s sustainable development; however, there is lack of evidence showing that sustainability would be affected by the interaction effects between FFS and COH. We believe these new findings from the perspective of hospital operation provide insights and could serve as a reference for the healthcare payment hierarchical reform by COH in low and middle-income countries (LMICs), which are going through the primary stage of the healthcare reform.

Time to retire? A register-based study of GPs' practice style prior to retirement

In many healthcare systems a large share of general practitioners (GPs) is retiring. The literature has shown a negative correlation between physicians' age and their quality of care. However, little is known about whether GPs exhibit different practice styles in the years prior to retirement. This study investigates whether GPs who are closer to retirement make different professional choices than GPs who are not as close to retirement. Using detailed administrative data on 555 Danish GPs and their patients from 2005 to 2017, we study GPs' practice styles across a ten-year period prior to retirement and compare these with GPs who retire at a later date ('non-retiring GPs'), while controlling for age differences as well as exogenous factors affecting healthcare provision. We focus on the GPs' number of enlisted patients, revenue, provision of consultations, and treatment behaviour in consultations. We find no differences between retiring and non-retiring GPs for key outcomes such as 'revenue per patient' and 'consultations per patient'. However, we find that retiring GPs have fewer enlisted patients in their final years of practicing. This finding is driven by more patients leaving rather than fewer patients joining their lists. We also find that retirement is associated with other dimensions of GPs' practice style, e.g. their provision of home visits, prescribing, and referral rates. Overall, we find a modest association between GPs' retirement and their practice style.

Allocation of health care under pay for performance: Winners and losers

Many physicians receive a payment for their performance (P4P). This performance is often linked to a health target that triggers a bonus when met. For some patients the target is easily met, while others require a significant amount of care to reach the target (if ever). This study contributes to the literature by providing evidence of how P4P affects allocation of care across patients with low and high responsiveness to treatment compared to a fixed payment, such as capitation and salary, under different degrees of resource constraint. Our evidence is based on a controlled laboratory experiment involving 143 medical students in Denmark in 2019. We find that patients who have the potential to reach the health target, gain care under P4P, whereas patients with no potential to reach it, may receive less care. Redistribution of care between patients under P4P arises when physicians are resource constrained. As many physicians are currently operating under tight resource constraints, policymakers should be careful to avoid unintended inequalities in patients' access to health care when introducing P4P. Risk-adjusting the performance target may potentially solve this issue.

Resource scarcity and prioritization decisions in medical care: A lab experiment with heterogeneous patient types

During the COVID-19 pandemic, health care systems around the world have received additional funding, while at other times, financial support has been lowered to consolidate public spending. Such budget changes likely affect provision behavior in health care. We study how different degrees of resource scarcity affect medical service provision and, in consequence, patients' health. In a controlled lab environment, physicians are paid by capitation and allocate limited resources to several patients. This implies a trade-off between physicians' profits and patients' health benefits. We vary levels of resource scarcity and patient characteristics systematically and observe that most subjects in the role of physician devote a relatively stable share of budget to patient treatment, implying that they provide fewer services when they face more severe budget constraints. Average patient benefits decrease in proportion to physician budgets. The majority of subjects chooses an allocation that leads to equal patient benefits as opposed to allocating resources efficiently.

Custom-made health-care: an experimental investigation

BACKGROUND

Physicians' financial interests might conflict with the best service to patients. It is essential to gain a thorough understanding of the effect of remuneration systems on physician behaviour.

METHODS

We conducted a controlled laboratory experiment using a within-subject design to investigate physician behaviour underpayment heterogeneity. Each physician provided medical care to patients whose treatments were paid for under fee-for-service (FFS) or capitation (CAP).

RESULTS

We observed that physicians customized their care in response to the payment system. FFS patients received considerably more medical care than did CAP patients with the same illness and treatment preference. Physicians over-served FFS patients and under-served CAP patients. After a CAP payment reduction, we observed neither a quantity reduction under CAP nor a spillover in FFS patients' treatment.

CONCLUSIONS

The results suggest that, in our experimental model, fee regulation can be used to some extent to control physician spending since we did not identify a behavioural response to the CAP payment cut. Physicians did not recoup lost income by altering treatment behaviour toward CAP and/or FFS patients. Experimental economics is an excellent tool for ensuring the welfare of all those involved in the health system. Further research should investigate payment incentives as a means of developing health care teams that are more efficient.

Stirring the pot: Switching from blended fee-for-service to blended capitation models of physician remuneration

In Canada's most populous province, Ontario, family physicians may choose between the blended fee-for-service (Family Health Group [FHG]) and blended capitation (Family Health Organization [FHO] payment models). Both models incentivize physicians to provide after-hours (AH) and comprehensive care, but FHO physicians receive a capitation payment per enrolled patient adjusted for age and sex, plus a reduced fee-for-service while FHG physicians are paid by fee-for-service. We develop a theoretical model of physician labor supply with multitasking to predict their behavior under FHG and FHO, and estimable equations are derived to test the predictions empirically. Using health administrative data from 2006 to 2014 and a two-stage estimation strategy, we study the impact of switching from FHG to FHO on the production of a capitated basket of services, after-hours services and nonincentivized services. Our results reveal that switching from the FHG to FHO reduces the production of capitated services to enrolled patients and services to nonenrolled patients by 15% and 5% per annum and increases the production of after-hours and nonincentivized services by 8% and 15% per annum.

Physician Behavior under Prospective Payment Schemes-Evidence from Artefactual Field and Lab Experiments

Recent experimental studies analyze the behavior of physicians towards patients and find that physicians care for their own profit as well as patient benefit. In this paper, we extend the experimental analysis of the physician decision problem by adding a third party which represents the health insurance that finances medical service provision under a prospective payment scheme. Our results show that physicians take into account the payoffs of the third party, which can lead to underprovision of medical care. We conduct a laboratory experiment in neutral as well as in medical framing using students and medical doctors as subjects. Subjects in the medically framed experiments behave weakly and are more patient orientated in contrast to neutral framing. A sample of medical doctors exhibits comparable behavior to students with medical framing.