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

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  • Damien Échevin
  • Bernard Fortin

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 simple theoretical 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, using a large patient-level administrative panel data set from a major teaching hospital, we estimate a model of transition between spells in and out of hospital analog to a difference-in-differences method. The model is based on a two-state Mixed Proportional Hazard approach. We find that the hospital length of stay of patients treated in departments that opted for the MC system increased on average by 10.8% (0.71 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

  • Damien Échevin & Bernard Fortin, 2011. "Physician Payment Mechanisms, Hospital Length of Stay and Risk of Readmission: a Natural Experiment," Cahiers de recherche 1112, CIRPEE.
  • Handle: RePEc:lvl:lacicr:1112
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    Cited by:

    1. Brosig-Koch, Jeannette & Kairies-Schwarz, Nadja & Kokot, Johanna, 2014. "Sorting into Physician Payment Schemes – A Laboratory Experiment," Ruhr Economic Papers 529, RWI - Leibniz-Institut für Wirtschaftsforschung, Ruhr-University Bochum, TU Dortmund University, University of Duisburg-Essen.
    2. Jeannette Brosig-Koch & Nadja Kairies-Schwarz & Johanna Kokot, 2014. "Sorting into Physician Payment Schemes – A Laboratory Experiment," Ruhr Economic Papers 0529, Rheinisch-Westfälisches Institut für Wirtschaftsforschung, Ruhr-Universität Bochum, Universität Dortmund, Universität Duisburg-Essen.
    3. repec:zbw:rwirep:0529 is not listed on IDEAS

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    More about this item

    Keywords

    Physician payment mechanisms; mixed compensation; hospital length of stay; risk of re-hospitalisation; duration model; natural experiment;
    All these keywords.

    JEL classification:

    • 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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