Galina Besstremyannaya Spoke on 'The Adverse Effects of Value-based Purchasing in Health Care: Dynamic Quantile Regression with Endogeneity'

On October 6 the Higher School of Economics and the New Economic School held a research seminar on political economy. Galina Besstremyannaya, Centre for Economic and Financial Research at New Economic School, presented the report on 'The Adverse Effects of Value-based Purchasing in Health Care: Dynamic Quantile Regression with Endogeneity'.

Abstract:
The paper demonstrates differential effects of performance-based reimbursement, when price-setting within inpatient prospective payment system is related to benchmark values of quality measures or length-of-stay. We develop fixed effect quantile regression dynamic panel data models with endogeneity and apply them to nationwide administrative databases for recent implementations of performance-based reimbursement in the U.S. (Hospital Compare data for 4048 hospitals in 2008-2014) and Japan (Ministry of Health, Labor and Welfare’s data for 1849 hospitals in 2005-2014). The results indicate persuasive evidence supporting the adverse effects of value-based purchasing for best-performing hospitals. Patient experience of care measures significantly decrease in the top percentiles of the U.S. hospitals. Similarly, average length of stay significantly increases for most diagnosis-related groups at Japanese hospitals in percentiles with the lowest length of stay. A natural experiment aimed at best-practice rate setting diminishes the undesired effects of the reform.