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The adverse effects of incentives regulation in health care: a comparative analysis with the U.S. and Japanese hospital data

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  • Galina Besstremyannaya

    () (CEFIR at New Economic School)

Abstract

The paper analyzes the effect of incentives regulation, when the yardstick competition approach is supplemented with a performance tax on providers. In an application to prospective payments in health care in the U.S. and Japan, we show differential effects of value-based purchasing, when price-setting is related to benchmark values of quality measures or length-of-stay. The predictions of our theoretical model, as well as empirical results offer persuasive evidence that unintended effects appear for best-performing hospitals. Patient experience/clinical-process-of-care measures significantly decrease in the top percentiles of the U.S. hospitals owing to the reform. Similarly, 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, 2015. "The adverse effects of incentives regulation in health care: a comparative analysis with the U.S. and Japanese hospital data," Working Papers w0218, Center for Economic and Financial Research (CEFIR).
  • Handle: RePEc:cfr:cefirw:w0218
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    File URL: http://www.cefir.ru/papers/WP218.pdf
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    References listed on IDEAS

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    More about this item

    Keywords

    quantile regressions; prospective payment; hospital financing;

    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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