IDEAS home Printed from https://ideas.repec.org/a/eee/soceps/v72y2020ics0038012120301725.html
   My bibliography  Save this article

Design of financial incentives and payment schemes in healthcare systems: A review

Author

Listed:
  • Fainman, Emily Zhu
  • Kucukyazici, Beste

Abstract

In this paper, we review the existing studies on the design of financial incentives and payment mechanisms for healthcare service providers, which have been published in the literature of operations research & management science. We classify these studies in two ways: first, by the care provider focused on: physicians or hospitals; and next, by categorizing payment/incentive schemes as retrospective or prospective models under each care provider group. The problem setting, including the geographic background and research methodology, are briefly discussed for each paper, as are the findings with regard to accessibility, quality, efficiency, and the facilitation of integration and collaboration, if reported. We also provide a detailed discussion of potential research problems that would offer promising avenues for future study.

Suggested Citation

  • Fainman, Emily Zhu & Kucukyazici, Beste, 2020. "Design of financial incentives and payment schemes in healthcare systems: A review," Socio-Economic Planning Sciences, Elsevier, vol. 72(C).
    • Handle: RePEc:eee:soceps:v:72:y:2020:i:c:s0038012120301725
    DOI: 10.1016/j.seps.2020.100901
    as

    Download full text from publisher

    File URL: http://www.sciencedirect.com/science/article/pii/S0038012120301725
    Download Restriction: Full text for ScienceDirect subscribers only
    File URL: https://libkey.io/10.1016/j.seps.2020.100901?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    References listed on IDEAS

    as
    1. Donald K. K. Lee & Stefanos A. Zenios, 2012. "An Evidence-Based Incentive System for Medicare's End-Stage Renal Disease Program," Management Science, INFORMS, vol. 58(6), pages 1092-1105, June.
    2. Houyuan Jiang & Zhan Pang & Sergei Savin, 2012. "Performance-Based Contracts for Outpatient Medical Services," Manufacturing & Service Operations Management, INFORMS, vol. 14(4), pages 654-669, October.
    3. Shwartz, Michael & Burgess, James F. & Zhu, Joe, 2016. "A DEA based composite measure of quality and its associated data uncertainty interval for health care provider profiling and pay-for-performance," European Journal of Operational Research, Elsevier, vol. 253(2), pages 489-502.
    4. David Epstein & Anne Mason, 2006. "Costs and prices for inpatient care in England: Mirror twins or distant cousins?," Health Care Management Science, Springer, vol. 9(3), pages 233-242, August.
    5. Karen S Palmer & Thomas Agoritsas & Danielle Martin & Taryn Scott & Sohail M Mulla & Ashley P Miller & Arnav Agarwal & Andrew Bresnahan & Afeez Abiola Hazzan & Rebecca A Jeffery & Arnaud Merglen & Ahm, 2014. "Activity-Based Funding of Hospitals and Its Impact on Mortality, Readmission, Discharge Destination, Severity of Illness, and Volume of Care: A Systematic Review and Meta-Analysis," PLOS ONE, Public Library of Science, vol. 9(10), pages 1-1, October.
    6. Michael Shwartz & Melanie L. Lenard, 1994. "Improving Economic Incentives in Hospital Prospective Payment Systems Through Equilibrium Pricing," Management Science, INFORMS, vol. 40(6), pages 774-787, June.
    7. Hui Zhang & Christian Wernz & Danny R. Hughes, 2018. "A Stochastic Game Analysis of Incentives and Behavioral Barriers in Chronic Disease Management," Service Science, INFORMS, vol. 10(3), pages 302-319, September.
    8. Nicos Savva & Tolga Tezcan & Özlem Yıldız, 2019. "Can Yardstick Competition Reduce Waiting Times?," Management Science, INFORMS, vol. 65(7), pages 3196-3215, July.
    9. Fernando Sánchez-Martínez & José-María Abellán-Perpiñán & Jorge-Eduardo Martínez-Pérez & Jaume Puig-Junoy, 2006. "Cost accounting and public reimbursement schemes in Spanish hospitals," Health Care Management Science, Springer, vol. 9(3), pages 225-232, August.
    10. Anil Aswani & Zuo-Jun Max Shen & Auyon Siddiq, 2019. "Data-Driven Incentive Design in the Medicare Shared Savings Program," Operations Research, INFORMS, vol. 67(4), pages 1002-1026, July.
    11. Houyuan Jiang & Zhan Pang & Sergei Savin, 2020. "Performance Incentives and Competition in Health Care Markets," Production and Operations Management, Production and Operations Management Society, vol. 29(5), pages 1145-1164, May.
    12. Richard C. Morey & David A. Dittman, 1984. "Hospital Profit Planning under Medicare Reimbursement," Operations Research, INFORMS, vol. 32(2), pages 250-269, April.
    13. Iustin Nedelea & James Fannin, 2013. "Technical efficiency of Critical Access Hospitals: an application of the two-stage approach with double bootstrap," Health Care Management Science, Springer, vol. 16(1), pages 27-36, March.
    14. Hamsa Bastani & Joel Goh & Mohsen Bayati, 2019. "Evidence of Upcoding in Pay-for-Performance Programs," Management Science, INFORMS, vol. 65(3), pages 1042-1060, March.
    15. Jonas Schreyögg & Oliver Tiemann & Reinhard Busse, 2006. "Cost accounting to determine prices: How well do prices reflect costs in the German DRG-system?," Health Care Management Science, Springer, vol. 9(3), pages 269-279, August.
    16. Blake, John T. & Carter, Michael W., 2002. "A goal programming approach to strategic resource allocation in acute care hospitals," European Journal of Operational Research, Elsevier, vol. 140(3), pages 541-561, August.
    17. Mili Mehrotra & Karthik V. Natarajan, 2020. "Value of Combining Patient and Provider Incentives in Humanitarian Health Care Service Programs," Production and Operations Management, Production and Operations Management Society, vol. 29(3), pages 571-594, March.
    18. Qu Qian & Pengfei Guo & Robin Lindsey, 2017. "Comparison of Subsidy Schemes for Reducing Waiting Times in Healthcare Systems," Production and Operations Management, Production and Operations Management Society, vol. 26(11), pages 2033-2049, November.
    19. Oliveira, Monica D. & Bevan, Gwyn, 2008. "Modelling hospital costs to produce evidence for policies that promote equity and efficiency," European Journal of Operational Research, Elsevier, vol. 185(3), pages 933-947, March.
    20. Diwas Singh KC & Stefan Scholtes & Christian Terwiesch, 2020. "Empirical Research in Healthcare Operations: Past Research, Present Understanding, and Future Opportunities," Manufacturing & Service Operations Management, INFORMS, vol. 22(1), pages 73-83, January.
    21. Dimitrios A. Andritsos & Christopher S. Tang, 2018. "Incentive Programs for Reducing Readmissions when Patient Care is Co†Produced," Production and Operations Management, Production and Operations Management Society, vol. 27(6), pages 999-1020, June.
    22. Oliver Tiemann & Jonas Schreyögg, 2012. "Changes in hospital efficiency after privatization," Health Care Management Science, Springer, vol. 15(4), pages 310-326, December.
    23. Peter Gaal & Nóra Stefka & Júlia Nagy, 2006. "Cost accounting methodologies in price setting of acute inpatient services in Hungary," Health Care Management Science, Springer, vol. 9(3), pages 243-250, August.
    24. Piet Verheyen, 1998. "The Missing Link in Budget Models of Nonprofit Institutions: Two Practical Dutch Applications," Management Science, INFORMS, vol. 44(6), pages 787-800, June.
    25. Anni Ankjær-Jensen & Pernille Rosling & Lone Bilde, 2006. "Variable prospective financing in the Danish hospital sector and the development of a Danish case-mix system," Health Care Management Science, Springer, vol. 9(3), pages 259-268, August.
    26. Margit Sommersguter-Reichmann, 2000. "The impact of the Austrian hospital financing reform on hospital productivity: empirical evidence on efficiency and technology changes using a non-parametric input-based Malmquist approach," Health Care Management Science, Springer, vol. 3(4), pages 309-321, September.
    27. Brian Hutchison & Jeremiah Hurley & Stephen Birch & Jonathan Lomas & Stephen Walter & John Eyles & Fawne Stratford-Devai, 2000. "Needs-based primary medical care capitation: Development and evaluation of alternative approaches," Health Care Management Science, Springer, vol. 3(2), pages 89-99, February.
    28. Paul Rouse & Robert Swales, 2006. "Pricing public health care services using DEA: Methodology versus politics," Annals of Operations Research, Springer, vol. 145(1), pages 265-280, July.
    29. David M. Cutler, 2002. "Equality, Efficiency, and Market Fundamentals: The Dynamics of International Medical-Care Reform," Journal of Economic Literature, American Economic Association, vol. 40(3), pages 881-906, September.
    30. Rajitkanok Puenpatom & Robert Rosenman, 2008. "Efficiency of Thai provincial public hospitals during the introduction of universal health coverage using capitation," Health Care Management Science, Springer, vol. 11(4), pages 319-338, December.
    31. Pengfei Guo & Christopher S. Tang & Yulan Wang & Ming Zhao, 2019. "The Impact of Reimbursement Policy on Social Welfare, Revisit Rate, and Waiting Time in a Public Healthcare System: Fee-for-Service Versus Bundled Payment," Service Science, INFORMS, vol. 21(1), pages 154-170, January.
    32. Barış Ata & Bradley L. Killaly & Tava Lennon Olsen & Rodney P. Parker, 2013. "On Hospice Operations Under Medicare Reimbursement Policies," Management Science, INFORMS, vol. 59(5), pages 1027-1044, May.
    33. Velibor V. Mišić & Georgia Perakis, 2020. "Data Analytics in Operations Management: A Review," Manufacturing & Service Operations Management, INFORMS, vol. 22(1), pages 158-169, January.
    34. Robert A. Shumsky & Edieal J. Pinker, 2003. "Gatekeepers and Referrals in Services," Management Science, INFORMS, vol. 49(7), pages 839-856, July.
    35. Elodie Adida & Hamed Mamani & Shima Nassiri, 2017. "Bundled Payment vs. Fee-for-Service: Impact of Payment Scheme on Performance," Management Science, INFORMS, vol. 63(5), pages 1606-1624, May.
    36. Prashant C. Fuloria & Stefanos A. Zenios, 2001. "Outcomes-Adjusted Reimbursement in a Health-Care Delivery System," Management Science, INFORMS, vol. 47(6), pages 735-751, June.
    37. Zhongsheng Hua & Wuhua Chen & Zhe George Zhang, 2016. "Competition and Coordination in Two-Tier Public Service Systems under Government Fiscal Policy," Production and Operations Management, Production and Operations Management Society, vol. 25(8), pages 1430-1448, August.
    38. Andrei Shleifer, 1985. "A Theory of Yardstick Competition," RAND Journal of Economics, The RAND Corporation, vol. 16(3), pages 319-327, Autumn.
    39. Elodie Adida & Fernanda Bravo, 2019. "Contracts for Healthcare Referral Services: Coordination via Outcome-Based Penalty Contracts," Management Science, INFORMS, vol. 65(3), pages 1322-1341, March.
    40. Thomas Czypionka & Markus Kraus & Susanne Mayer & Gerald Röhrling, 2014. "Efficiency, ownership, and financing of hospitals: The case of Austria," Health Care Management Science, Springer, vol. 17(4), pages 331-347, December.
    41. Helmut Herwartz & Christoph Strumann, 2012. "On the effect of prospective payment on local hospital competition in Germany," Health Care Management Science, Springer, vol. 15(1), pages 48-62, March.
    42. Martine Bellanger & Laurent Tardif, 2006. "Accounting and reimbursement schemes for inpatient care in France," Health Care Management Science, Springer, vol. 9(3), pages 295-305, August.
    43. Xiaofang Wang & Qi Wu & Guoming Lai & Alan Scheller‐Wolf, 2019. "Offering Discretionary Healthcare Services with Medical Consumption," Production and Operations Management, Production and Operations Management Society, vol. 28(9), pages 2291-2304, September.
    44. Max A. Woodbury & Kenneth G. Manton & James C. Vertrees, 1993. "A Model for Allocating Budgets in a Closed System Which Simultaneously Computes DRG Allocation Weights," Operations Research, INFORMS, vol. 41(2), pages 298-309, April.
    45. Randy V. Bradley & Terry L. Esper & Joonhwan In & Kang B. Lee & Bogdan C. Bichescu & Terry Anthony Byrd, 2018. "The Joint Use of RFID and EDI: Implications for Hospital Performance," Production and Operations Management, Production and Operations Management Society, vol. 27(11), pages 2071-2090, November.
    46. Robert B. Fetter, 1991. "Diagnosis Related Groups: Understanding Hospital Performance," Interfaces, INFORMS, vol. 21(1), pages 6-26, February.
    47. Hessam Bavafa & Sergei Savin & Christian Terwiesch, 2019. "Managing Patient Panels with Non‐Physician Providers," Production and Operations Management, Production and Operations Management Society, vol. 28(6), pages 1577-1593, June.
    48. Rune Sørensen & Jostein Grytten, 2000. "Contract design for primary care physicians: Physician location and practice behaviour in small communities," Health Care Management Science, Springer, vol. 3(2), pages 151-157, February.
    49. Ellis, Randall P., 1998. "Creaming, skimping and dumping: provider competition on the intensive and extensive margins1," Journal of Health Economics, Elsevier, vol. 17(5), pages 537-555, October.
    50. Eric M. Webb & Alex F. Mills, 2019. "Incentive–Compatible Prehospital Triage in Emergency Medical Services," Production and Operations Management, Production and Operations Management Society, vol. 28(9), pages 2221-2241, September.
    51. Kut C. So & Christopher S. Tang, 2000. "Modeling the Impact of an Outcome-Oriented Reimbursement Policy on Clinic, Patients, and Pharmaceutical Firms," Management Science, INFORMS, vol. 46(7), pages 875-892, July.
    52. Blake, John T. & Carter, Michael W., 2003. "Physician and hospital funding options in a public system with decreasing resources," Socio-Economic Planning Sciences, Elsevier, vol. 37(1), pages 45-68, March.
    53. Tinglong Dai & Mustafa Akan & Sridhar Tayur, 2017. "Imaging Room and Beyond: The Underlying Economics Behind Physicians’ Test-Ordering Behavior in Outpatient Services," Manufacturing & Service Operations Management, INFORMS, vol. 19(1), pages 99-113, February.
    54. Verheyen, Piet A. & Nederstigt, Pieter F. P. M., 1992. "A cost-allocation system applied to Dutch hospitals," European Journal of Operational Research, Elsevier, vol. 58(3), pages 393-403, May.
    55. Diwakar Gupta & Mili Mehrotra, 2015. "Bundled Payments For Healthcare Services: Proposer Selection and Information Sharing," Operations Research, INFORMS, vol. 63(4), pages 772-788, August.
    56. Víctor Giménez & Jorge R. Keith & Diego Prior, 2019. "Do healthcare financing systems influence hospital efficiency? A metafrontier approach for the case of Mexico," Health Care Management Science, Springer, vol. 22(3), pages 549-559, September.
    57. Salar Ghamat & Gregory S. Zaric & Hubert Pun, 2018. "Contracts to Promote Optimal Use of Optional Diagnostic Tests in Cancer Treatment," Production and Operations Management, Production and Operations Management Society, vol. 27(12), pages 2184-2200, December.
    58. Tinglong Dai & Mustafa Akan & Sridhar Tayur, 2017. "Imaging Room and Beyond: The Underlying Economics Behind Physicians’ Test-Ordering Behavior in Outpatient Services," Manufacturing & Service Operations Management, INFORMS, vol. 19(1), pages 99-113, February.
    59. Giovanni Fattore & Aleksandra Torbica, 2006. "Inpatient reimbursement system in Italy: How do tariffs relate to costs?," Health Care Management Science, Springer, vol. 9(3), pages 251-258, August.
    60. Cutler, David, 2002. "Equality, Efficiency, and Market Fundamentals: The Dynamics of International Medical Care Reform," Scholarly Articles 2640584, Harvard University Department of Economics.
    61. Stuart Peacock & Leonie Segal, 2000. "Capitation funding in Australia: Imperatives and impediments," Health Care Management Science, Springer, vol. 3(2), pages 77-88, February.
    62. Pinar Keskinocak & Nicos Savva, 2020. "A Review of the Healthcare-Management (Modeling) Literature Published in Manufacturing & Service Operations Management," Manufacturing & Service Operations Management, INFORMS, vol. 22(1), pages 59-72, January.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Zhao, Heng & Liu, Zixian & Li, Mei & Liang, Lijun, 2022. "Optimal monitoring policies for chronic diseases under healthcare warranty," Socio-Economic Planning Sciences, Elsevier, vol. 84(C).
    2. Li, Zhong-Ping & Chang, Aichih (Jasmine) & Zou, Zongbao, 2023. "Design mechanism to coordinate a hierarchical healthcare system: Patient subsidy vs. capacity investment," Omega, Elsevier, vol. 118(C).
    3. Roberto Aringhieri & Patrick Hirsch & Marion S. Rauner & Melanie Reuter-Oppermanns & Margit Sommersguter-Reichmann, 2022. "Central European journal of operations research (CJOR) “operations research applied to health services (ORAHS) in Europe: general trends and ORAHS 2020 conference in Vienna, Austria”," Central European Journal of Operations Research, Springer;Slovak Society for Operations Research;Hungarian Operational Research Society;Czech Society for Operations Research;Österr. Gesellschaft für Operations Research (ÖGOR);Slovenian Society Informatika - Section for Operational Research;Croatian Operational Research Society, vol. 30(1), pages 1-18, March.
    4. Martin Chalkley & Hugh Gravelle & Nikita Jacob & Rita Santos & Luigi Siciliani, 2022. "This paper constitutes the first and foundational output of the ESHCRU2 project 3 - Analysis of purcher-provider contracts: modelling risk sharing and incentive implications. In this project, we have ," Working Papers 187cherp, Centre for Health Economics, University of York.
    5. Fernanda Bravo & Retsef Levi & Georgia Perakis & Gonzalo Romero, 2023. "Care coordination for healthcare referrals under a shared‐savings program," Production and Operations Management, Production and Operations Management Society, vol. 32(1), pages 189-206, January.
    6. Li, Zhong-Ping & Wang, Jian-Jun, 2021. "Effects of healthcare quality and reimbursement rate in a hospital association," Socio-Economic Planning Sciences, Elsevier, vol. 76(C).

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Li, Zhong-Ping & Chang, Aichih (Jasmine) & Zou, Zongbao, 2023. "Design mechanism to coordinate a hierarchical healthcare system: Patient subsidy vs. capacity investment," Omega, Elsevier, vol. 118(C).
    2. Pengfei Guo & Christopher S. Tang & Yulan Wang & Ming Zhao, 2019. "The Impact of Reimbursement Policy on Social Welfare, Revisit Rate, and Waiting Time in a Public Healthcare System: Fee-for-Service Versus Bundled Payment," Service Science, INFORMS, vol. 21(1), pages 154-170, January.
    3. Li, Zhong-Ping & Wang, Jian-Jun, 2021. "Effects of healthcare quality and reimbursement rate in a hospital association," Socio-Economic Planning Sciences, Elsevier, vol. 76(C).
    4. Tinglong Dai & Sridhar Tayur, 2020. "OM Forum—Healthcare Operations Management: A Snapshot of Emerging Research," Manufacturing & Service Operations Management, INFORMS, vol. 22(5), pages 869-887, September.
    5. Polyzos, Nikolaos & Karanikas, Haralampos & Thireos, Eleftherios & Kastanioti, Catherine & Kontodimopoulos, Nick, 2013. "Reforming reimbursement of public hospitals in Greece during the economic crisis: Implementation of a DRG system," Health Policy, Elsevier, vol. 109(1), pages 14-22.
    6. Fernanda Bravo & Retsef Levi & Georgia Perakis & Gonzalo Romero, 2023. "Care coordination for healthcare referrals under a shared‐savings program," Production and Operations Management, Production and Operations Management Society, vol. 32(1), pages 189-206, January.
    7. Zhou, Cuihua & Lan, Yanfei & Li, Weifeng & Zhao, Ruiqing, 2022. "Medicare policies in a two-Tier healthcare system with overtreatment," Omega, Elsevier, vol. 109(C).
    8. Raulinajtys-Grzybek, Monika, 2014. "Cost accounting models used for price-setting of health services: An international review," Health Policy, Elsevier, vol. 118(3), pages 341-353.
    9. Jonas Schreyögg & Tom Stargardt & Oliver Tiemann & Reinhard Busse, 2006. "Methods to determine reimbursement rates for diagnosis related groups (DRG): A comparison of nine European countries," Health Care Management Science, Springer, vol. 9(3), pages 215-223, August.
    10. Houyuan Jiang & Zhan Pang & Sergei Savin, 2020. "Performance Incentives and Competition in Health Care Markets," Production and Operations Management, Production and Operations Management Society, vol. 29(5), pages 1145-1164, May.
    11. Zhong-Ping Li & Jian-Jun Wang & Ai-Chih Chang & Jim Shi, 2021. "Capacity reallocation via sinking high-quality resource in a hierarchical healthcare system," Annals of Operations Research, Springer, vol. 300(1), pages 97-135, May.
    12. Wang, Jian-Jun & Li, Zhong-Ping & Shi, Jim (Junmin) & Chang, Ai-Chih (Jasmine), 2021. "Hospital referral and capacity strategies in the two-tier healthcare systems," Omega, Elsevier, vol. 100(C).
    13. Anil Aswani & Zuo-Jun Max Shen & Auyon Siddiq, 2019. "Data-Driven Incentive Design in the Medicare Shared Savings Program," Operations Research, INFORMS, vol. 67(4), pages 1002-1026, July.
    14. Vogl, Matthias, 2013. "Improving patient-level costing in the English and the German ‘DRG’ system," Health Policy, Elsevier, vol. 109(3), pages 290-300.
    15. Seokjun Youn & H. Neil Geismar & Michael Pinedo, 2022. "Planning and scheduling in healthcare for better care coordination: Current understanding, trending topics, and future opportunities," Production and Operations Management, Production and Operations Management Society, vol. 31(12), pages 4407-4423, December.
    16. Elodie Adida & Hamed Mamani & Shima Nassiri, 2017. "Bundled Payment vs. Fee-for-Service: Impact of Payment Scheme on Performance," Management Science, INFORMS, vol. 63(5), pages 1606-1624, May.
    17. Elodie Adida, 2021. "Outcome-Based Pricing for New Pharmaceuticals via Rebates," Management Science, INFORMS, vol. 67(2), pages 892-913, February.
    18. Zhou, Cuihua & Hao, Yifei & Lan, Yanfei & Li, Weifeng, 2023. "To introduce or not? Strategic analysis of hospital operations with telemedicine," European Journal of Operational Research, Elsevier, vol. 304(1), pages 292-307.
    19. Nicos Savva & Tolga Tezcan & Özlem Yıldız, 2019. "Can Yardstick Competition Reduce Waiting Times?," Management Science, INFORMS, vol. 65(7), pages 3196-3215, July.
    20. Xianyi Wang & Xiaofang Wang & Hui He, 2021. "Contracts to Coordinate Healthcare Providers in the Telemedicine Referral System," Sustainability, MDPI, vol. 13(18), pages 1-25, September.

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:eee:soceps:v:72:y:2020:i:c:s0038012120301725. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Catherine Liu (email available below). General contact details of provider: http://www.elsevier.com/locate/seps .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.