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Physician Payment Mechanisms, Hospital Length of Stay and Risk of Readmission: Evidence from a Natural Experiment

Author

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  • Échevin, Damien

    () (University of Sherbrooke)

  • Fortin, Bernard

    () (Université Laval)

Abstract

We provide an analysis of the effect of physician payment methods on their hospital patients' length of stay and risk of readmission. To do so, we exploit a major reform implemented in Quebec (Canada) in 1999. The Quebec Government introduced an optional mixed compensation (MC) scheme for specialist physicians working in hospital. This scheme combines a fixed per diem with a reduced fee for services provided, as an alternative to the traditional fee-for- service system. We develop a model of a physician's decision to choose the MC scheme. We show that a physician who adopts this system will have incentives to increase his time per clinical service provided. We demonstrate that as long as this effect does not improve his patients' health by more than a critical level, they will stay more days in hospital over the period. At the empirical level, we estimate a model of transition between spells in and out of hospital analog to a difference-in-differences approach. We find that the hospital length of stay of patients treated in departments that opted for the MC system increased on average by 5.3% (0.35 days). However, the risk of readmission to the same department with the same diagnosis does not appear to be overall affected by the reform.

Suggested Citation

  • Échevin, Damien & Fortin, Bernard, 2013. "Physician Payment Mechanisms, Hospital Length of Stay and Risk of Readmission: Evidence from a Natural Experiment," IZA Discussion Papers 7835, Institute for the Study of Labor (IZA).
  • Handle: RePEc:iza:izadps:dp7835
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    References listed on IDEAS

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    Cited by:

    1. Margit Sommersguter-Reichmann & Adolf Stepan, 2017. "Hospital physician payment mechanisms in Austria: do they provide gateways to institutional corruption?," Health Economics Review, Springer, vol. 7(1), pages 1-13, December.

    More about this item

    Keywords

    duration model; physician payment mechanisms; mixed compensation; hospital length of stay; risk of re-hospitalisation; natural experiment;

    JEL classification:

    • J33 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Compensation Packages; Payment Methods
    • I10 - Health, Education, and Welfare - - Health - - - General
    • I12 - Health, Education, and Welfare - - Health - - - Health Behavior
    • I18 - Health, Education, and Welfare - - Health - - - Government Policy; Regulation; Public Health
    • C41 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods: Special Topics - - - Duration Analysis; Optimal Timing Strategies

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