Unit 6 Flashcards
relation of incentives and care delivered
• Incentives matter. How you pay someone affects the type of care that is delivered.
o The way you pay any kind of provider (doctor, hospital, etc.) effects the kind of care that is provided/delivered
• Incentives can have unintended consequences.
o They are not intention just people responding to incentives and acting in their own best interest
2 ways hospitals are paid
- retrospective
2. prospective
Retrospective payment
(fee-for-service) / no flat fee
each service has its own fee; If the hospital is paid for every service it provides, this creates an incentive to do more services
“retrospective” because will is paid after procedure is done
concern: too much care/money being spent leading to rising healthcare costs
This shows that when you get paid for everything you do, the for-profits provide more healthcare.
Prospective payment
(capitated) or flat fee (no matter what)
“prospective” because hospital knows the flat fee before procedures are done (the less I do, the more money I keep)
concern: too little care being delivered (because theres an incentives that pushes you to do less/cut corners)
What happened to the average length of stay for patients once Medicare changed from retrospective to prospective payment?
Diagnosis Related Groups (DRGs)
Incentives matter when it comes to the delivery of care.
their length of stay significantly decreased
when hospitals were paid a flat fee based on the DRG diagnosis, hospitals know what they were getting and wanted to get patients out the door quickly to fill the bed with more patients
How to incentives effect physicians?
they want to maximize their utility; incentives effect the way physicians deliver care
medicare regions
price went up for some hospitals in NJ and down for those in Manhatten (when in.a pool); where the price went up, the healthcare delivery increased. Doctors responded to the change in financial incentives and this affect the care they delivered
*incentives matter
informational asymmetry
- The physician is an expert on medical care, and the patient knows little about care and trusts the physician to act in their best interest. But the physician may have other interests in mind.
- Another factor may be moral hazard. If the physician knows the patient isn’t paying for much of the extra work being done, they may perform more care.
lack of information as a market failure
physician-induced demand
where demand for healthcare is influenced by physician choices
chemotherapy drug Paclitaxel study
Government realized they were overpaying for it, and then lowered the reimbursement rates –> there was a drop in the patients receiving the drug
The way a patient’s condition responded to Paclitaxel didn’t suddenly change (the incentive for using the drug dropped, so physicians stopped prescribing it)
Perverse effects
incentives can lead to unintended consequences - things that we never meant to happen.
e.g. # of hospital beds correlates with the amount of time spent in hospital
Study looking at hospital bed capacity and time spend in hospitals
a built bed is a filled bed
The more beds –> the more likely people are to be hospitalized
If a hospital has to fill its beds to get paid, they want patients to come to the hospital. If everyone is healthy all of the time, and no one needs to go to the hospital, then what happens to hospitals? They go out of business.
Volume response
physicians may provide more services per visit to make up for lost income
This study found that as those fees were dropped, the number of services (volume) was increasing per patient.
example: *Medicare reduced its payments for procedures (physicians are doing the same procedures but are making less) –> so physicians start ordering more tests (too make up for lost income)
with volume response there’s an opportunity cost associated with it : Having more things done is uncomfortable, may lead to false positives, or have negative side effects that harm the patient.
Cream-skimming
picking patients that are more profitable (and lower risk of complications); in response to volume response
The idea that you take the best outcomes and leave the other stuff you do not think is good behind (you skim the cream off).
example: in Europe, study showed physicians were responded to private insurance payers before public insurance payers
example: doctors pushing patients away who are higher risk –> surgeons required to report mortality records (which led to doctors cream skimming because they didn’t want someone dying because it will hurt their record (example: study at Cleveland clinic looking at the state patients were from and a lot were coming from NY as a direct result of cream-skimming); at-risk patients had to go elsewhere to get their care s a result
