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The adverse effects of value-based purchasing in health care: dynamic quantile regression with endogeneity

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  • Galina Besstremyannaya

    (Stanford University)

Abstract

The paper demonstrates differential effects of performance-based reimbursement, when price-setting within inpatient prospective payment system is related to benchmark values of quality measures or length-of-stay. We develop fixed effect quantile regression dynamic panel data models with endogeneity and apply them to nationwide administrative databases for recent implementations of performance-based reimbursement in the U.S. (Hospital Compare data for 4048 hospitals in 2008-2014) and Japan (Ministry of Health, Labor and Welfare's data for 1849 hospitals in 2005-2014). The results indicate persuasive evidence supporting the adverse effects of value-based purchasing for best-performing hospitals. Patient experience of care measures significantly decrease in the top percentiles of the U.S. hospitals. Similarly, average length of stay significantly increases for most diagnosis-related groups at Japanese hospitals in percentiles with the lowest length of stay. A natural experiment aimed at best-practice rate setting diminishes the undesired effects of the reform.

Suggested Citation

  • Galina Besstremyannaya, 2014. "The adverse effects of value-based purchasing in health care: dynamic quantile regression with endogeneity," Discussion Papers 14-006, Stanford Institute for Economic Policy Research.
    • Handle: RePEc:sip:dpaper:14-006
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    More about this item

    Keywords

    dynamic quantile regressions; prospective payment; diagnosis-related groups;
    All these keywords.

    JEL classification:

    • C22 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes
    • C23 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Models with Panel Data; Spatio-temporal Models
    • D21 - Microeconomics - - Production and Organizations - - - Firm Behavior: Theory
    • D22 - Microeconomics - - Production and Organizations - - - Firm Behavior: Empirical Analysis
    • I18 - Health, Education, and Welfare - - Health - - - Government Policy; Regulation; Public Health

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