The adverse effects of incentives regulation in health care: a comparative analysis with the U.S. and Japanese hospital data
No w0218, Working Papers from New Economic School (NES)
The paper analyzes the effect of incentives regulation, when the yardstick competition approach is supplemented with a performance tax on providers. In an application to prospective payments in health care in the U.S. and Japan, we show differential effects of value-based purchasing, when price-setting is related to benchmark values of quality measures or length-of-stay. The predictions of our theoretical model, as well as empirical results offer persuasive evidence that unintended effects appear for best-performing hospitals. Patient experience/clinical-process-of-care measures significantly decrease in the top percentiles of the U.S. hospitals owing to the reform. Similarly, 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: quantile regressions; prospective payment; hospital financing (search for similar items in EconPapers)
JEL-codes: C22 C23 D21 D22 I18 (search for similar items in EconPapers)
Pages: 55 pages
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Persistent link: https://EconPapers.repec.org/RePEc:abo:neswpt:w0218
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