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Financial Incentives, Hospital Care, and Health Outcomes: Evidence from Fair Pricing Laws

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  • Michael Batty
  • Benedic Ippolito

Abstract

State laws that limit how much hospitals are paid by uninsured patients provide a unique opportunity to study how financial incentives of health care providers affect the care they deliver. We estimate the laws reduce payments from uninsured patients by 25-30 percent. Even though the uninsured represent a small portion of their business, hospitals respond by decreasing the amount of care delivered to these patients, without measurable effects on a broad set of quality metrics. The results show that hospitals can, and do, target care based on financial considerations, and suggest that altering provider financial incentives can generate more efficient care.

Suggested Citation

  • Michael Batty & Benedic Ippolito, 2017. "Financial Incentives, Hospital Care, and Health Outcomes: Evidence from Fair Pricing Laws," American Economic Journal: Economic Policy, American Economic Association, vol. 9(2), pages 28-56, May.
  • Handle: RePEc:aea:aejpol:v:9:y:2017:i:2:p:28-56
    Note: DOI: 10.1257/pol.20160060
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    References listed on IDEAS

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    Blog mentions

    As found by EconAcademics.org, the blog aggregator for Economics research:
    1. Sam Watson’s journal round-up for 12th June 2017
      by Sam Watson in The Academic Health Economists' Blog on 2017-06-12 16:00:00

    Citations

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    Cited by:

    1. Lai, Yi & Fu, Hongqiao & Li, Ling & Yip, Winnie, 2022. "Hospital response to a case-based payment scheme under regional global budget: The case of Guangzhou in China," Social Science & Medicine, Elsevier, vol. 292(C).
    2. Jeffrey Clemens & Benedic Ippolito, 2019. "Uncompensated Care and the Collapse of Hospital Payment Regulation: An Illustration of the Tinbergen Rule," Public Finance Review, , vol. 47(6), pages 1002-1041, November.
    3. Dillender, Marcus & Jinks, Lu & Lo Sasso, Anthony T., 2023. "When (and why) providers do not respond to changes in reimbursement rates," Journal of Public Economics, Elsevier, vol. 217(C).
    4. Eva Labro & Lorien Stice-Lawrence, 2020. "Updating Accounting Systems: Longitudinal Evidence from the Healthcare Sector," Management Science, INFORMS, vol. 66(12), pages 6042-6061, December.

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    More about this item

    JEL classification:

    • G22 - Financial Economics - - Financial Institutions and Services - - - Insurance; Insurance Companies; Actuarial Studies
    • H75 - Public Economics - - State and Local Government; Intergovernmental Relations - - - State and Local Government: Health, Education, and Welfare
    • I11 - Health, Education, and Welfare - - Health - - - Analysis of Health Care Markets
    • I13 - Health, Education, and Welfare - - Health - - - Health Insurance, Public and Private
    • I18 - Health, Education, and Welfare - - Health - - - Government Policy; Regulation; Public Health

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