IDEAS home Printed from https://ideas.repec.org/a/ucp/amjhec/doi10.1086-721707.html
   My bibliography  Save this article

Moneyball in Medicare

Author

Listed:
  • Edward C. Norton
  • Emily J. Lawton
  • Jun Li

Abstract

One of the most important changes to the US health-care system over the last two decades is the emergence of pay-for-performance to encourage hospitals and other providers to improve quality of care. Unlike fee-for-service reimbursement, these value-based purchasing programs measure aspects of quality and financially reward hospitals that are outstanding or at least improving in their care. Prior research has shown that hospitals often improve more when the marginal financial incentives are larger. However, the exact relationship between marginal financial incentives and year-over-year improvement in measures remains unclear. We use national 2015–18 data on approximately 2,700 hospitals to estimate how hospitals respond to pay-for-performance incentives in the Hospital Value-Based Purchasing (HVBP) Program. We show that this relationship is nonlinear, has strong serial correlation, is generally similar for different types of hospitals (with the exception of hospitals in the most competitive markets responding more strongly), and usually has similar patterns of sign, magnitude, and significance for both measures of marginal incentives. The results are critical for improving public policy for pay-for-performance programs.

Suggested Citation

  • Edward C. Norton & Emily J. Lawton & Jun Li, 2023. "Moneyball in Medicare," American Journal of Health Economics, University of Chicago Press, vol. 9(1), pages 96-126.
    • Handle: RePEc:ucp:amjhec:doi:10.1086/721707
    DOI: 10.1086/721707
    as

    Download full text from publisher

    File URL: http://dx.doi.org/10.1086/721707
    Download Restriction: Access to the online full text or PDF requires a subscription.
    File URL: http://dx.doi.org/10.1086/721707
    Download Restriction: Access to the online full text or PDF requires a subscription.
    File URL: https://libkey.io/10.1086/721707?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 look for a different version below or search for a different version of it.

    Other versions of this item:

    References listed on IDEAS

    as
    1. Holmstrom, Bengt & Milgrom, Paul, 1991. "Multitask Principal-Agent Analyses: Incentive Contracts, Asset Ownership, and Job Design," The Journal of Law, Economics, and Organization, Oxford University Press, vol. 7(0), pages 24-52, Special I.
    2. Jacob, Brian A., 2005. "Accountability, incentives and behavior: the impact of high-stakes testing in the Chicago Public Schools," Journal of Public Economics, Elsevier, vol. 89(5-6), pages 761-796, June.
    3. Neal, Derek, 2011. "The Design of Performance Pay in Education," Handbook of the Economics of Education, in: Erik Hanushek & Stephen Machin & Ludger Woessmann (ed.), Handbook of the Economics of Education, edition 1, volume 4, chapter 0, pages 495-550, Elsevier.
    4. Derek Neal, 2011. "The Design of Performance Pay in Education," NBER Working Papers 16710, National Bureau of Economic Research, Inc.
    5. Roland G. Fryer, 2013. "Teacher Incentives and Student Achievement: Evidence from New York City Public Schools," Journal of Labor Economics, University of Chicago Press, vol. 31(2), pages 373-407.
    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. Emma McManus & Jack Elliott & Rachel Meacock & Paul Wilson & Judith Gellatly & Matt Sutton, 2021. "The effects of structure, process and outcome incentives on primary care referrals to a national prevention programme," Health Economics, John Wiley & Sons, Ltd., vol. 30(6), pages 1393-1416, June.
    2. Jun Li, 2022. "Value‐Based Payments in Health Care: Evidence from a Nationwide Randomized Experiment in the Home Health Sector," Journal of Policy Analysis and Management, John Wiley & Sons, Ltd., vol. 41(4), pages 1090-1117, September.
    3. Andrew I. Friedson & William C. Horrace & Allison F. Marier, 2019. "So Many Hospitals, So Little Information: How Hospital Value‐Based Purchasing Is a Game of Chance," Southern Economic Journal, John Wiley & Sons, vol. 86(2), pages 773-799, October.
    4. Cheatham, Leah P. & Randolph, Karen A. & Boltz, Laura D., 2020. "Youth with disabilities transitioning from foster care: Examining prevalence and predicting positive outcomes," Children and Youth Services Review, Elsevier, vol. 110(C).
    5. Joseph Doyle & John Graves & Jonathan Gruber, 2019. "Evaluating Measures of Hospital Quality: Evidence from Ambulance Referral Patterns," The Review of Economics and Statistics, MIT Press, vol. 101(5), pages 841-852, December.
    6. Søren Rud Kristensen, 2017. "Financial Penalties for Performance in Health Care," Health Economics, John Wiley & Sons, Ltd., vol. 26(2), pages 143-148, February.
    7. Levy, Deborah & Hills, Raewyn & Perkins, Harvey C. & Mackay, Michael & Campbell, Malcolm & Johnston, Karen, 2021. "Local benevolent property development entrepreneurs in small town regeneration," Land Use Policy, Elsevier, vol. 108(C).
    8. Cornell, Portia Y. & Grabowski, David C. & Norton, Edward C. & Rahman, Momotazur, 2019. "Do report cards predict future quality? The case of skilled nursing facilities," Journal of Health Economics, Elsevier, vol. 66(C), pages 208-221.

    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. Shirin, Farzana, 2023. "Does Teacher Salary Support Improve Student Learning Outcomes," 2023 Annual Meeting, July 23-25, Washington D.C. 335793, Agricultural and Applied Economics Association.
    2. Michael Dinerstein & Isaac M. Opper, 2022. "Screening with Multitasking," CESifo Working Paper Series 9869, CESifo.
    3. Jones, Michael D., 2013. "Teacher behavior under performance pay incentives," Economics of Education Review, Elsevier, vol. 37(C), pages 148-164.
    4. Yeşilırmak, Muharrem, 2019. "Bonus pay for teachers, spatial sorting, and student achievement," European Journal of Political Economy, Elsevier, vol. 59(C), pages 129-158.
    5. Barrera-Osorio, Felipe & Raju, Dhushyanth, 2017. "Teacher performance pay: Experimental evidence from Pakistan," Journal of Public Economics, Elsevier, vol. 148(C), pages 75-91.
    6. Ken Yahagi, 2023. "Sanctions and rewards with a motivated agent," Managerial and Decision Economics, John Wiley & Sons, Ltd., vol. 44(4), pages 2057-2067, June.
    7. Cotofan, Maria, 2021. "Learning from praise: Evidence from a field experiment with teachers," Journal of Public Economics, Elsevier, vol. 204(C).
    8. Pope, Nolan G., 2019. "The effect of teacher ratings on teacher performance," Journal of Public Economics, Elsevier, vol. 172(C), pages 84-110.
    9. Roland G. Fryer, 2013. "Teacher Incentives and Student Achievement: Evidence from New York City Public Schools," Journal of Labor Economics, University of Chicago Press, vol. 31(2), pages 373-407.
    10. Sarena F. Goodman & Lesley J. Turner, 2013. "The Design of Teacher Incentive Pay and Educational Outcomes: Evidence from the New York City Bonus Program," Journal of Labor Economics, University of Chicago Press, vol. 31(2), pages 409-420.
    11. Timothy Bond & Kevin Mumford, 2017. "Teacher Performance Pay in the United States: Incidence and Adult Outcomes," Purdue University Economics Working Papers 1289, Purdue University, Department of Economics.
    12. Daniel Jones & Mirco Tonin & Michael Vlassopoulos, 2018. "Paying for what kind of performance? Performance pay and multitasking in mission-oriented jobs," BEMPS - Bozen Economics & Management Paper Series BEMPS51, Faculty of Economics and Management at the Free University of Bozen.
    13. Roland Fryer & Steven Levitt & John List & Sally Sadoff, 2012. "Enhancing the Efficacy of Teacher Incentives through Loss Aversion: A Field Experiment," Framed Field Experiments 00591, The Field Experiments Website.
    14. Samuel Berlinski & Norbert Schady, 2015. "Daycare Services: It’s All about Quality," Palgrave Macmillan Books, in: Samuel Berlinski & Norbert Schady (ed.), The Early Years, chapter 4, pages 91-119, Palgrave Macmillan.
    15. Jian Zhang & Songqing Jin & Wei Si, 2020. "Incentivising teachers? Evaluating the incentive effect of China’s teacher performance‐based compensation reform in rural China," Australian Journal of Agricultural and Resource Economics, Australian Agricultural and Resource Economics Society, vol. 64(1), pages 171-188, January.
    16. Scott A. Imberman, 2015. "How effective are financial incentives for teachers?," IZA World of Labor, Institute of Labor Economics (IZA), pages 158-158, June.
    17. Bengt Holmström, 2017. "Pay for Performance and Beyond," American Economic Review, American Economic Association, vol. 107(7), pages 1753-1777, July.
    18. Eric S. Taylor & John H. Tyler, 2011. "The Effect of Evaluation on Performance: Evidence from Longitudinal Student Achievement Data of Mid-career Teachers," NBER Working Papers 16877, National Bureau of Economic Research, Inc.
    19. M. Caridad Araujo & Yyannu Cruz-Aguayo & Analia Jaimovich & Sharon Lynn Kagan, 2015. "Drawing Up an Institutional Architecture," IDB Publications (Book Chapters), in: Samuel Berlinski & Norbert Schady (ed.), The Early Years: Child Well-Being and the Role of Public Policy, edition 1, chapter 7, pages 179-202, Inter-American Development Bank.
    20. Isaac Mbiti & Mauricio Romero & Youdi Schipper, 2023. "Designing Effective Teacher Performance Pay Programs: Experimental Evidence from Tanzania," The Economic Journal, Royal Economic Society, vol. 133(653), pages 1968-2000.

    More about this item

    JEL classification:

    • 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

    Statistics

    Access and download statistics

    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:ucp:amjhec:doi:10.1086/721707. 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: Journals Division (email available below). General contact details of provider: https://www.journals.uchicago.edu/AJHE .

    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.