Working Paper: NBER ID: w30615
Authors: Atul Gupta; Guy David; Lucy Kunhee Kim
Abstract: Medicare has increased the use of performance pay incentives for hospitals, with the goal of increasing care coordination across providers, reducing market frictions, and ultimately to improve quality of care. This paper provides new empirical evidence by using novel operations and claims data from a large, independent home health care firm with the Hospital Readmissions Reduction Program (HRRP) penalty on hospitals providing identifying variation. We find that the penalty incentive to reduce re-hospitalizations passed through from hospitals to the firm at least for some types of patients, since it provided more care inputs for heart disease patients discharged from hospitals at greater penalty risk and that contributed more patients to the firm. This evidence suggests that HRRP helped increase coordination between hospitals and home health firms without formal integration. Greater home health effort does not appear to have led to lower patient readmissions.
Keywords: performance pay; market frictions; Medicare; hospital readmissions reduction program; health care coordination
JEL Codes: I11; I13; I18
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| HRRP penalties (I18) | rehospitalizations (I11) |
| rehospitalizations (I11) | care provided by HHAs (I11) |
| HRRP penalties (I18) | care inputs for heart disease patients (I11) |
| care inputs for heart disease patients (I11) | episode costs for heart failure patients (I11) |
| HRRP penalties (I18) | HHA resource allocation (I18) |
| greater caregiver experience and time spent (I11) | care delivery (I11) |
| HRRP penalties (I18) | increase in costs for pneumonia patients (H51) |