The adverse effects of value-based purchasing in health care: dynamic quantile regression with endogeneity

Galina Besstremyannaya

No 14-006, Discussion Papers from Stanford Institute for Economic Policy Research

Abstract: The paper demonstrates differential effects of performance-based reimbursement, when price-setting within inpatient prospective payment system is related to benchmark values of quality measures or length-of-stay. We develop fixed effect quantile regression dynamic panel data models with endogeneity and apply them to nationwide administrative databases for recent implementations of performance-based reimbursement in the U.S. (Hospital Compare data for 4048 hospitals in 2008-2014) and Japan (Ministry of Health, Labor and Welfare's data for 1849 hospitals in 2005-2014). The results indicate persuasive evidence supporting the adverse effects of value-based purchasing for best-performing hospitals. Patient experience of care measures significantly decrease in the top percentiles of the U.S. hospitals. Similarly, average length of stay significantly increases for most diagnosis-related groups at Japanese hospitals in percentiles with the lowest length of stay. A natural experiment aimed at best-practice rate setting diminishes the undesired effects of the reform.

Keywords: dynamic quantile regressions; prospective payment; diagnosis-related groups (search for similar items in EconPapers)
JEL-codes: C22 C23 D21 D22 I18 (search for similar items in EconPapers)
Date: 2014-11
New Economics Papers: this item is included in nep-hea
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