lecture 3 - physician treatment and referral decision

Question 1

Possible consequences when physicians receive higher prices for their treatments?

Answer 1

-> physicians receive more income, total health expenditures will rise
-> higher intensity of services and improves patients’ health
-> quicker diffusion of new technology

Question 2

ROLE OF PRICE TRANSPARENCY IN HEALTH CARE

Answer 2

• Stimulates competition
  o Insurers prefer lower priced treatments (all else equal)
• Is important when insurers have to buy care on behalf of the customers in an efficient way
• Have to benchmark among different healthcare providers
• Steer customers to specific providers
• Exclude expensive providers from the provider network
  o Consumers can shop around for lower priced treatments (all else equal)
• If there is cost-sharing, consumers can compare prices
  o It is fair to know the price of a treatment (check billing accounts)
• It is fair to know the price (is the price reasonable for the treatment you got?)

Question 3

reasons for large variation hospital contract prices across hospitals

Answer 3

• “…different cost-pricing methods of hospitals…”
• “…different technology, wage levels, quality and efficiency of a hospital (including economies of scale and scope) and case-mix differences within DTCs…”
• “… result of differences in hospital strategy and hospital market power…”
• …considerable uncertainty about underlying costs per DTC product…”

Question 4

reasons for large variation hospital contract prices across insurers

Answer 4

• “… prices may have been ‘mechanically’ adjusted annually to generate the lumpsum payments as negotiated by the insurer and the hospital”
• “…combination of different purchasing strategies and differences in market power between health insurers…”

Question 5

idea of price transparency

Answer 5

“….publishing price information could narrow the range and lower the level of prices,
1) in part by permitting consumers to engage in more cost-conscious shopping and select lower-cost providers (costs go down) and
2) in part by stimulating price competition on the supply side, forcing high-priced providers to lower their prices (or accept smaller annual increases) in order to remain competitive”. (prices go down)
(Sinaiko & Rosenthal, 2011: 892)

Question 6

why do patients not choose

Answer 6

• Patients are insured
• Quality is important (…but notoriously difficult to measure)
• Patients do not overrule referrals
• Asymmetric information; you don’t exactly know what you are buying

Question 7

low utilization of price transparency tool because…

Answer 7

• Unawareness
  o They were unaware that they received such a tool
• Decisions are driven by physician referrals /established relationships with clinicians
• Complexity
  o For many people it was a complex tool and people didn’t know what to do with it
• If patients’ OOP costs are the same at high-cost and low-cost doctor, why select the cheaper one?

Question 8

hospital perspective - (dis)advantages lumpsum

Answer 8

Advantages for hospital
* No production incentives
* Any cost-savings you can realize are profits
* You can concentrate for five years on providing care as efficient as possible (do it your own way)

Disadvantages hospital
* You have to negotiate a high enough lumpsum payment for the coming five years with insurers
* Uncertainty about future health care costs

Question 9

insurer perspective - (dis)advantages lumpsum

Answer 9

Advantages for insurer
* If you can negotiate a low lumpsum payment for the coming five years, you can save a lot on health care spending
* No risk in hospital spending over time

Disadvantages for insurer
* Hospitals may skimp on quality of care
* Lumpsum is related to hospital cost, not to population costs
o Hospital may send patients to other hospitals
o Hospital may refer care to outside hospital (primary care)
o Insurer has to pay twice, because the patient is going to another hospital and that hospital could have a contract on fee for service

Question 10

some results after reform with lumpsum

Answer 10

• Less unnecessary care
• Less (intensive care)
• More cooperation with GP
• Organisational change
• Removing production incentives
• Bottom-up initiatives

2. Lower turnover and number of patients at the hospital level
   * More patients referred to outside the hospital
3. Not significantly more patients were referred to other hospitals