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Hospital productivity and value in pay-for-performance healthcare programs.

Chenzhang Bao1, Indranil R Bardhan2

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Pay-for-performance (P4P) programs improved average hospital productivity and value, but many hospitals lagged behind. Horizontal integration boosted both, while vertical integration only improved productivity, not value.

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Area of Science:

  • Health Services Research
  • Health Economics
  • Hospital Management

Background:

  • Pay-for-performance (P4P) reimbursement models were introduced in the U.S. in 2013 to link hospital payments to quality outcomes.
  • The long-term impact of these value-based initiatives on hospital productivity and healthcare value remains incompletely understood.
  • Concerns exist regarding potential disparities in the effectiveness of P4P programs across different hospitals.

Purpose of the Study:

  • To evaluate the long-term performance implications of P4P programs on hospital productivity and healthcare value.
  • To analyze trends in hospital performance using a nationwide dataset from 2008 to 2019.
  • To investigate the impact of horizontal and vertical integration on hospital productivity and value.

Main Methods:

  • Utilized data envelopment analysis (DEA) to measure hospital performance.
  • Employed the Malmquist index to assess longitudinal trends in productivity and value.
  • Analyzed a nationwide sample of U.S. hospitals from 2008 to 2019.

Main Results:

  • Average hospital productivity and healthcare value demonstrated improvement following the implementation of P4P programs.
  • A significant proportion of hospitals failed to keep pace with performance frontier advancements, indicating widening disparities.
  • Horizontal integration correlated positively with both productivity and value.
  • Vertical integration (physician-hospital) was associated with increased productivity but not with improved value.

Conclusions:

  • While P4P programs have shown positive average effects, their impact is uneven, potentially exacerbating disparities.
  • Horizontal integration appears to be a beneficial strategy for enhancing both hospital productivity and value.
  • Policymakers and hospital managers should consider the differential impacts of integration strategies and address disparities in value-based care initiatives.