Les Cahiers de Recherche - HEC Paris
Dimitrios Andritsos and Christopher Tang
Incentive Programs for Reducing Readmissions When Patient Care is Co-Produced
Abstract: To reduce preventable readmissions, many healthcare
systems are transitioning from Fee-for-Service (FFS) to other reimbursement
schemes such as Pay-for-Performance (P4P) or Bundled Payment (BP) so that
the funder of a healthcare system can transfer to the hospital some of the
financial risks associated with patient re-hospitalizations. To examine the
effectiveness of different schemes (FFS, P4P, and BP), we develop a "health
co-production" model in which the patient's readmissions can be "jointly
controlled" by the efforts exerted by both the hospital and the patient.
Our analysis of the equilibrium outcomes reveals that FFS cannot entice the
hospital and the patient to exert readmission-reduction efforts. Relative
to BP, we find that P4P is more "robust" in the sense that it can induce
readmission-reduction efforts under milder conditions. However, BP can
induce greater efforts compared to P4P. More importantly, we characterize
the conditions under which BP (or P4P) is the dominant scheme from the
funder's perspective. Finally, we find that patient cost-sharing can
generate two benefits: (a) it provides incentive for patients to exert
efforts; and (b) if not excessive, it can reduce the readmission rate.
Keywords: co-productive services; hospital readmissions; pay-for-performance; bundled payment; (follow links to similar papers)
36 pages, September 27, 2015
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