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Incentivizing Cost-Effective Reductions in Hospital Readmission Rates

James Cox (), Vjollca Sadiraj (), Kurt Schnier () and John F. Sweeney

No 2015-01, Experimental Economics Center Working Paper Series from Experimental Economics Center, Andrew Young School of Policy Studies, Georgia State University

Abstract: The recent regulatory changes enacted by the Centers for Medicare and Medicaid Services (CMS) have identified hospital readmission rates as a critical healthcare quality metric. This research focuses on the utilization of pay-for-performance (P4P) mechanisms to cost effectively reduce hospital readmission rates and meet the regulatory standards set by CMS. Using the experimental economics laboratory we find that both of the P4P mechanisms researched, bonus and bundled payments, cost-effectively meet the performance criteria set forth by CMS. The bundled payment mechanism generates the largest reduction in patient length of stay (LOS) without altering the probability of readmission. Combined these results indicate that utilizing P4P mechanisms incentivizes cost effective reductions in hospital readmission rates.

Keywords: Pay-for-Performance (P4P); Healthcare; Experiment (search for similar items in EconPapers)
JEL-codes: C91 D81 I10 (search for similar items in EconPapers)
Pages: 30
Date: 2015-03
New Economics Papers: this item is included in nep-exp and nep-hrm
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Journal Article: Incentivizing cost-effective reductions in hospital readmission rates (2016) Downloads
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