Taking care of high-need patients in capitation-based payment schemes

an experimental investigation into the importance of market conditions

Research output: Contribution to journalJournal articleResearchpeer-review

Abstract

Many health-care systems use provider payment as an instrument to ensure an efficient and equitable delivery of care. Capitation-based payment schemes are popular because they contain costs. However, they are known to lead to underprovision of care, especially to high-need patients. Using a laboratory experiment, we test whether the availability of resources affects providers’ response to a capitation-based scheme. We find that the relative underprovision of care to high-need patients exists both when providers are resource abundant and constrained. Next, we introduce two different versions of the scheme and test whether they incentivize providers to take better care of high-need patients. One scheme ring-fences part of the capitation payment to a fixed physician salary, whilst the other scheme differentiates payments based on patients’ expected need of care. We find that high-need patients gain the most from a fixed provider salary under resource abundance, but find no difference in gains between patient types under resource constraint. Our results also show that differentiation of capitation makes providers take relatively better care of patients linked to an above average payment compared to a below average payment, regardless of resource constraints. Our findings suggest that both the design of the scheme and the market condition affect providers’ patient prioritization under capitation.

Original languageEnglish
JournalApplied Economics
Volume51
Issue number47
Pages (from-to)5174-5184
ISSN0003-6846
DOIs
Publication statusPublished - 2019

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Capitation
Payment
Market conditions
Resources
Salary
Resource constraints
Health care system
Physicians
Laboratory experiments
Prioritization
Costs

Keywords

  • Physician payment system
  • capitation-based payments
  • equity
  • laboratory experiment

Cite this

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title = "Taking care of high-need patients in capitation-based payment schemes: an experimental investigation into the importance of market conditions",
abstract = "Many health-care systems use provider payment as an instrument to ensure an efficient and equitable delivery of care. Capitation-based payment schemes are popular because they contain costs. However, they are known to lead to underprovision of care, especially to high-need patients. Using a laboratory experiment, we test whether the availability of resources affects providers’ response to a capitation-based scheme. We find that the relative underprovision of care to high-need patients exists both when providers are resource abundant and constrained. Next, we introduce two different versions of the scheme and test whether they incentivize providers to take better care of high-need patients. One scheme ring-fences part of the capitation payment to a fixed physician salary, whilst the other scheme differentiates payments based on patients’ expected need of care. We find that high-need patients gain the most from a fixed provider salary under resource abundance, but find no difference in gains between patient types under resource constraint. Our results also show that differentiation of capitation makes providers take relatively better care of patients linked to an above average payment compared to a below average payment, regardless of resource constraints. Our findings suggest that both the design of the scheme and the market condition affect providers’ patient prioritization under capitation.",
keywords = "Physician payment system, capitation-based payments, equity, laboratory experiment",
author = "Oxholm, {Anne Sophie} and {Di Guida}, Sibilla and Dorte Gyrd-Hansen and {Rose Olsen}, Kim",
year = "2019",
doi = "10.1080/00036846.2019.1610715",
language = "English",
volume = "51",
pages = "5174--5184",
journal = "Applied Economics",
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T1 - Taking care of high-need patients in capitation-based payment schemes

T2 - an experimental investigation into the importance of market conditions

AU - Oxholm, Anne Sophie

AU - Di Guida, Sibilla

AU - Gyrd-Hansen, Dorte

AU - Rose Olsen, Kim

PY - 2019

Y1 - 2019

N2 - Many health-care systems use provider payment as an instrument to ensure an efficient and equitable delivery of care. Capitation-based payment schemes are popular because they contain costs. However, they are known to lead to underprovision of care, especially to high-need patients. Using a laboratory experiment, we test whether the availability of resources affects providers’ response to a capitation-based scheme. We find that the relative underprovision of care to high-need patients exists both when providers are resource abundant and constrained. Next, we introduce two different versions of the scheme and test whether they incentivize providers to take better care of high-need patients. One scheme ring-fences part of the capitation payment to a fixed physician salary, whilst the other scheme differentiates payments based on patients’ expected need of care. We find that high-need patients gain the most from a fixed provider salary under resource abundance, but find no difference in gains between patient types under resource constraint. Our results also show that differentiation of capitation makes providers take relatively better care of patients linked to an above average payment compared to a below average payment, regardless of resource constraints. Our findings suggest that both the design of the scheme and the market condition affect providers’ patient prioritization under capitation.

AB - Many health-care systems use provider payment as an instrument to ensure an efficient and equitable delivery of care. Capitation-based payment schemes are popular because they contain costs. However, they are known to lead to underprovision of care, especially to high-need patients. Using a laboratory experiment, we test whether the availability of resources affects providers’ response to a capitation-based scheme. We find that the relative underprovision of care to high-need patients exists both when providers are resource abundant and constrained. Next, we introduce two different versions of the scheme and test whether they incentivize providers to take better care of high-need patients. One scheme ring-fences part of the capitation payment to a fixed physician salary, whilst the other scheme differentiates payments based on patients’ expected need of care. We find that high-need patients gain the most from a fixed provider salary under resource abundance, but find no difference in gains between patient types under resource constraint. Our results also show that differentiation of capitation makes providers take relatively better care of patients linked to an above average payment compared to a below average payment, regardless of resource constraints. Our findings suggest that both the design of the scheme and the market condition affect providers’ patient prioritization under capitation.

KW - Physician payment system

KW - capitation-based payments

KW - equity

KW - laboratory experiment

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DO - 10.1080/00036846.2019.1610715

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JO - Applied Economics

JF - Applied Economics

SN - 0003-6846

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ER -