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Reforming Payments to Healthcare Providers: The Key to Slowing Healthcare Cost Growth While Improving Quality?

  • Mark McClellan
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    This paper focuses on a broad movement toward a fundamentally different way of paying healthcare providers. The approach reaches beyond the old dichotomies about whether healthcare providers are reimbursed on a fee-for-service or a "capitated" or per-person payment. Instead, these reforms seek to create direct linkages between payments to healthcare providers and measures of the quality and efficiency of care. After an overview of payment reforms for healthcare providers and their welfare implications, this paper discusses a range of empirical studies. These often small-scale studies suggest that provider payment reforms in conjunction with greater attention to improving measurements of care quality and outcomes can have a significant impact on quality of care and, in some cases, resource use and costs of care.

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    File URL: http://www.aeaweb.org/articles.php?doi=10.1257/jep.25.2.69
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    Article provided by American Economic Association in its journal Journal of Economic Perspectives.

    Volume (Year): 25 (2011)
    Issue (Month): 2 (Spring)
    Pages: 69-92

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    Handle: RePEc:aea:jecper:v:25:y:2011:i:2:p:69-92
    Note: DOI: 10.1257/jep.25.2.69
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    1. David Dranove & Ginger Zhe Jin, 2010. "Quality Disclosure and Certification: Theory and Practice," NBER Working Papers 15644, National Bureau of Economic Research, Inc.
    2. Cutler, David M, 1995. "The Incidence of Adverse Medical Outcomes under Prospective Payment," Econometrica, Econometric Society, vol. 63(1), pages 29-50, January.
    3. Randall D. Cebul & James B. Rebitzer & Lowell J. Taylor & Mark Votruba, 2008. "Organizational Fragmentation and Care Quality in the U.S. Health Care System," NBER Working Papers 14212, National Bureau of Economic Research, Inc.
    4. Amy Finkelstein, 2005. "The Aggregate Effects of Health Insurance: Evidence from the Introduction of Medicare," NBER Working Papers 11619, National Bureau of Economic Research, Inc.
    5. Florian Heiss & Daniel McFadden & Joachim Winter, 2009. "Regulation of private health insurance markets: Lessons from enrollment, plan type choice, and adverse selection in Medicare Part D," NBER Working Papers 15392, National Bureau of Economic Research, Inc.
    6. Mark McClellan, 1997. "Hospital Reimbursement Incentives: An Empirical Analysis," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 6(1), pages 91-128, 03.
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