Hospital response to a new case-based payment system in China: the patient selection effect

Area of Science:

• Health Economics
• Healthcare Policy
• Medical Payment Systems

Background:

• China implemented a Diagnosis-Intervention Packet (DIP) payment system, a form of global budget prospective payment, classifying patients by diagnosis and procedures.
• Understanding provider responses to payment reforms is crucial for effective healthcare policy and cost containment.

Purpose of the Study:

• To evaluate the impact of China's DIP payment reform on hospital patient selection and treatment intensity for total hip/knee arthroplasty (THA/TKA) and arteriosclerotic heart disease (AHD).

Main Methods:

• A difference-in-differences approach was used to compare changes in patient characteristics (age, Charlson Comorbidity Index [CCI] for severity) and treatment intensity (relative weight [RW]) before and after the DIP reform (July 2019).
• The study analyzed data from July 2017 to June 2021 in a large Chinese city, comparing hospitals in DIP pilot areas with non-pilot areas.

Main Results:

• Hospitals under the DIP reform admitted patients with increased severity for THA/TKA compared to non-DIP hospitals.
• Treatment intensity (RW) for AHD patients increased significantly more in DIP hospitals (5.5%) than in non-DIP hospitals post-reform.
• Patient age trends were similar across DIP and non-DIP hospitals for both conditions; AHD patient severity decreased in non-DIP hospitals.

Conclusions:

• The DIP payment reform prompted hospitals to admit sicker patients and intensify treatment for AHD, indicating unintended consequences alongside cost containment goals.
• Policymakers should carefully consider the balance between prospective payment system benefits and potential adverse effects.
• The DIP payment model may offer insights for alternative payment systems in other countries.