Financial incentives and health provider behaviour: Evidence from a capitation policy in Ghana

The capitation payment model has been used as a supply-side cost-containment tool in controlling physician behaviour. However, little is known regarding its effectiveness in controlling costs and discouraging use of low-value care. This study seeks to examine whether financial incentives in capitation influence provider behaviour, and if so, whether such behaviour compromises outcomes for inpatients with hypertension. To this end, we evaluate the effect on outpatient visits and inpatient outcomes of the introduction of capitation into a mixed payment system involving diagnosis-related groups and fee-for-service in the Ashanti region of Ghana. We use difference-in-differences with fixed effects and event study analysis of claims data over 48 months (2016-2019). We found that providers responded to financial incentives in capitation; outpatient visits were approximately 35% lower. However, we found no significant impact of capitation on inpatient outcomes; that is, the in-hospital death rate did not increase, and the length of hospital stay (which may be a rough indicator of the severity of illness) also did not increase. These findings indicate that patient health outcomes did not deteriorate. Evidence suggests that the observed reduction in outpatient visits may be in unnecessary or low-value visits, especially at lower levels of the healthcare system.