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Incentivizing Cost-Effective Reductions in Hospital Readmission Rates

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  • James C. Cox
  • Vjollca Sadiraj
  • Kurt E. Schnier
  • John F. Sweeney

Abstract

The recent regulatory changes enacted by the Centers for Medicare and Medicaid Services (CMS) have identified hospital readmission rates as a critical healthcare quality metric. This research focuses on the utilization of pay-for-performance (P4P) mechanisms to cost effectively reduce hospital readmission rates and meet the regulatory standards set by CMS. Using the experimental economics laboratory we find that both of the P4P mechanisms researched, bonus and bundled payments, cost-effectively meet the performance criteria set forth by CMS. The bundled payment mechanism generates the largest reduction in patient length of stay (LOS) without altering the probability of readmission. Combined these results indicate that utilizing P4P mechanisms incentivizes cost effective reductions in hospital readmission rates.

Suggested Citation

  • James C. Cox & Vjollca Sadiraj & Kurt E. Schnier & John F. Sweeney, 2015. "Incentivizing Cost-Effective Reductions in Hospital Readmission Rates," Experimental Economics Center Working Paper Series 2015-01, Experimental Economics Center, Andrew Young School of Policy Studies, Georgia State University.
    • Handle: RePEc:exc:wpaper:2015-01
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    Cited by:

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    2. Domenico Lisi & Luigi Siciliani & Odd Rune Straume, 2020. "Hospital competition under pay‐for‐performance: Quality, mortality, and readmissions," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 29(2), pages 289-314, April.
    3. Nadja Kairies-Schwarz & Claudia Souček, 2020. "Performance Pay in Hospitals: An Experiment on Bonus–Malus Incentives," IJERPH, MDPI, vol. 17(22), pages 1-29, November.
    4. Castro, Massimo Finocchiaro & Ferrara, Paolo Lorenzo & Guccio, Calogero & Lisi, Domenico, 2019. "Medical malpractice liability and physicians’ behavior: Experimental evidence," Journal of Economic Behavior & Organization, Elsevier, vol. 166(C), pages 646-666.
    5. Moscelli, Giuseppe & Gravelle, Hugh & Siciliani, Luigi & Gutacker, Nils, 2018. "The effect of hospital ownership on quality of care: Evidence from England," Journal of Economic Behavior & Organization, Elsevier, vol. 153(C), pages 322-344.
    6. Castro, M.F.; & Ferrara, P.; & Guccio, C.; & Lisi, D.;, 2018. "Medical Malpractice Liability and Physicians’ Behavior:Experimental Evidence," Health, Econometrics and Data Group (HEDG) Working Papers 18/11, HEDG, c/o Department of Economics, University of York.
    7. James C. Cox & Vjollca Sadiraj & Kurt E. Schnier & John F. Sweeney, 2017. "Fit as a Fiddle or Sick as a Dog: Effects of Subjective Patient Reports on Uptake of Clinical Decision Support," Experimental Economics Center Working Paper Series 2017-03, Experimental Economics Center, Andrew Young School of Policy Studies, Georgia State University, revised Aug 2020.
    8. Finocchiaro Castro, Massimo & Ferrara, Paolo Lorenzo & Guccio, Calogero & Lisi, Domenico, 2021. "Optimal mixed payment system and medical liability. A laboratory study," MPRA Paper 110276, University Library of Munich, Germany.

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    More about this item

    Keywords

    Pay-for-Performance (P4P); Healthcare; Experiment;
    All these keywords.

    JEL classification:

    • C91 - Mathematical and Quantitative Methods - - Design of Experiments - - - Laboratory, Individual Behavior
    • D81 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Criteria for Decision-Making under Risk and Uncertainty
    • I10 - Health, Education, and Welfare - - Health - - - General

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