Do Incentives for Primary Care Physicians to Manage Chronic Disease Patients Work? Evidence from Rural China

Health systems globally face increasing morbidity and mortality from chronic disease, yet health systems—especially in low- and middle-income countries—often lack strong primary care for managing patients with hypertension, diabetes, and similar conditions. China provides an important case study, as a large and rapidly developing middle-income country once famous for its “barefoot doctors” but with a hospital-based service delivery system for its ageing population. China’s national health reforms since 2009 have emphasized strengthening primary care and equalization of basic public health services, yet there is little evidence evaluating the impact of these components of reform.

We analyze a program giving primary care physicians in rural China, as civil servants, financial and reputational incentives to expand their chronic disease patient caseloads and deliver a government-specified bundle of basic services. We assemble a unique dataset linking administrative and health data at the individual level for all registered residents of a county in Zhejiang province in eastern coastal China. The data include health insurance claims between 2011 and 2015 and primary care service records for over 70,000 rural Chinese diagnosed with hypertension or diabetes. Our study design utilizes variations in management intensity generated by administrative and geographic boundaries. We focus on villages that are within two kilometers of each other, yet have primary care services managed by different townships. The boundary villages are balanced across observable population characteristics such as age, gender, and educational attainment, and their residents enjoy identical insurance coverage and hospital access. Utilizing this plausibly exogenous variation, we find that patients residing in a village within a township with more intensive primary care management of chronic disease, compared to neighbors with less intensive management, had more primary care visits, fewer specialist visits, fewer hospital admissions, and lower inpatient spending. No such effects are evident in a placebo treatment year. Exploring the mechanism for reduced specialist and hospital utilization, we find that patients with more intensive primary care management exhibited better drug adherence as measured by medication-in-possession (e.g., the percentage of days in which the patient had a filled anti-hypertensive prescription in 2015).

These results suggest that physician incentives for improved primary care management led to better patient adherence to medications and primary care visits, and through that pathway reduced inpatient spending. While we lack evidence on longer-term health outcomes, inpatient admissions for hypertension and diabetes have been used internationally as indicators for the quality of primary care. A back-of-the-envelope estimate of welfare suggests that the resource savings from avoided inpatient admissions substantially outweigh the public subsidy costs of the program, even if we ignore the value of any associated improvements in quality of life and survival.