Working Paper: NBER ID: w23926
Authors: Caitlin Carroll; Michael Chernew; A. Mark Fendrick; Joe Thompson; Sherri Rose
Abstract: We study how physicians respond to financial incentives imposed by episode-based bundled 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 in the state to enter into EBP arrangements for perinatal care. Because of its multi-payer nature and the requirement that providers participate, the program covers the vast majority of births in the state. Unlike fee-for-service reimbursement, EBP holds physicians responsible for all care within a discrete clinical episode, rewarding physicians not only for efficient use of their own services but also for efficient management of other health care inputs. In a difference-in-differences analysis of commercial claims, we find that perinatal spending decreased by 3.8% overall in Arkansas after the introduction of EBP, compared to surrounding states. We find that the decrease was driven by reduced spending on non-physician health care inputs, specifically the prices paid for inpatient facility care, and that our results are robust to a number of sensitivity and placebo tests. We additionally find that EBP was associated with a limited improvement in quality of care.
Keywords: episode-based payment; health care spending; utilization; perinatal care; Arkansas
JEL Codes: I11; I18
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| Arkansas Health Care Payment Improvement Initiative (APII) (I13) | perinatal care spending (H51) |
| episode-based payment (EBP) (J33) | total episode spending (H56) |
| episode-based payment (EBP) (J33) | intrapartum facility spending (H76) |
| episode-based payment (EBP) (J33) | utilization patterns (R14) |
| episode-based payment (EBP) (J33) | chlamydia screening rates (C80) |