Effects of episode-based payment on health care spending and utilization: Evidence from perinatal care in Arkansas

Caitlin Carroll, Michael Chernew, A. Mark Fendrick, Joe Thompson, Sherri Rose

Research output: Contribution to journalArticlepeer-review

9 Scopus citations

Abstract

We study how physicians respond to financial incentives imposed by episode-based payment (EBP), which encourages lower spending and improved quality for an entire episode of care. Specifically, we study the impact of the Arkansas Health Care Payment Improvement Initiative, a multi-payer program that requires providers to enter into EBP arrangements for perinatal care, covering the majority of births in the state. Unlike fee-for-service reimbursement, EBP holds physicians responsible for all care within a discrete episode, rewarding physicians for efficient use of their own services and for efficient management of other health care inputs. In a difference-in-differences analysis of commercial claims, we find that perinatal spending in Arkansas decreased by 3.8% overall under EBP, compared to surrounding states. The decrease was driven by reduced spending on non-physician health care inputs, specifically the prices paid for inpatient facility care. We additionally find a limited improvement in quality of care under EBP.

Original languageEnglish (US)
Pages (from-to)47-62
Number of pages16
JournalJournal of Health Economics
Volume61
DOIs
StatePublished - Sep 2018
Externally publishedYes

Bibliographical note

Funding Information:
We would like to thank Tom McGuire and Randall Ellis for helpful comments and suggestions. This work was funded by the Laura and John Arnold Foundation, the Agency for Healthcare Research and Quality T32 trainee program (Carroll) and the National Science Foundation Graduate Research Fellowship (Carroll). Thompson wishes to disclose his involvement in developing the Arkansas Health Care Payment Improvement Initiative, both as Arkansas Surgeon General and as President of the Arkansas Center for Health Improvement.

Publisher Copyright:
© 2018 Elsevier B.V.

Keywords

  • Bundled payment
  • I1
  • I11
  • Incentive contracts
  • Perinatal care
  • Physician payment methods
  • Physician productivity

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