The Impact of a New Case-Based Payment System on Quality of Care: A Difference-in-Differences Analysis in China

China has developed and widely piloted a new case-based payment, ie, the "Diagnosis-Intervention Packet" (DIP) payment, which has a granular classification system. We evaluated the impact of DIP payment on the quality of care in a large pilot city in China and explored potential mechanisms of quality change.

The city started to implement DIP payment with a hospital-level cap on July 1, 2019. Using a 5% random sample of discharge records from July 2017 to June 2021, we employed a difference-in-differences approach to compare two mortality measures (in-hospital mortality, mortality of surgical patients), two readmission measures (all-cause readmission within 30 days, readmission with the same principal diagnosis within 30 days) and a patient safety measure (operation associated complications or adverse event) in 13 pilot hospitals and 27 non-pilot hospitals before and after DIP payment reform.

Of 122,637 discharge records included, 43,023 (35.1%) were from pilot hospitals. After DIP payment, the readmission rate within 30 days and readmission rate with the same principal diagnosis in pilot hospitals decreased significantly by 3.2 percentage points (P <0.001) and 1.8 percentage points (P <0.001), respectively. The in-hospital mortality rate, the mortality rate of surgical patients, and the rate of operation-associated complications or adverse events did not have significant changes. The decrease in quality measures was primarily driven by tertiary hospitals, was more obvious over time after the policy adoption, and was more pronounced in groups with higher intensity of care.

This study indicated that DIP payment with a cap in the study city was associated with improved quality of care among patients in pilot hospitals. The provider's behavior of increasing the intensity of care, especially for more severe patients, may partially contribute to the results.