The Impact of Payment Innovations on Hospital Behavior
The papers in this panel examine the impact of payment innovations on hospital behavior, exploring how hospitals respond to changes in their financial incentives. The payment innovations analyzed in this panel span state, national, and international policy changes, and all the studies find that hospitals change behavior in order to adapt to payment innovations. “Do Hospitals Respond to Price Changes?” examines the effect of the Centers for Medicare & Medicaid Services (CMS) 2008 policy change for acquired preventable complications for Medicare patients. Results from difference-in-differences analysis on inpatient claims data from California indicate that Medicare patients receiving total knee or hip replacements were less likely than their younger counterparts to experience a complication or readmission after the policy change. “Inpatient and Outpatient Utilization under Global Budgets in Maryland” analyzes the impact of global budgets implemented in eight rural Maryland hospitals in 2010 on revenues from inpatient and outpatient utilization. Results suggest that revenues from outpatient services relative to inpatient services increased in globally budgeted hospitals after implementation of the budgets. “Provider Responses to a Global Budget System” proposes and tests a theoretical model that explores the effect of the implementation of global budgets in Taiwan on hospital drug expenditures, finding that hard caps increase hospitals’ average monthly drug expenditures. The results of these studies have important implications for policies that implement payment and delivery innovations. Both of the studies on global budgets identify unintended consequences that arise as hospitals respond to the budgets; these perverse incentives warrant careful attention.