Provider behavior under prospective reimbursement. Cost sharing and supply

Area of Science:

• Health Economics
• Healthcare Management
• Medical Economics

Background:

• Physician service provision decisions are influenced by reimbursement structures.
• Hospital competition can exacerbate issues related to physician incentives.
• Existing payment models may create misaligned incentives between patient benefit and provider profit.

Purpose of the Study:

• To model physician choices regarding patient service levels under different reimbursement systems.
• To analyze the impact of prospective payment and cost-based reimbursement on service provision.
• To evaluate a mixed reimbursement system for its potential to improve efficiency and reduce risk.

Main Methods:

• Development of an economic model analyzing physician behavior.
• Comparative analysis of prospective payment, cost-based reimbursement, and a mixed system.
• Examination of how hospital competition affects physician incentives.

Main Results:

• Prospective payment can lead to underprovision of services when patient benefits are undervalued relative to hospital profits.
• Cost-based reimbursement can lead to overprovision of services.
• A mixed reimbursement system demonstrates superiority by aligning incentives for efficient service levels and reducing patient misclassification.

Conclusions:

• The design of reimbursement systems significantly influences healthcare service delivery.
• Mixed reimbursement models offer a promising approach to optimize physician incentives and reduce provider risk.
• Policy implications suggest careful consideration of payment structures to ensure efficient and appropriate patient care.