Working Papers & Articles Under Review
Abstract: Pay for performance (P4P) is increasingly being used as a tool to improve the cost effectiveness of healthcare. However, evidence on the efficacy of P4P remains mixed. The Hospital Readmission Reduction Program (HRRP) is a prominent P4P program of the Centers for Medicare and Medicaid (CMS) intended to reduce hospital readmissions. In this article, I use a regression kink design to obtain estimates of the effect of the HRRP on readmissions and potential mechanisms that hospitals may use to reduce readmissions, such as spending on inpatient care, discharge destination and patient selection. I also examine the effect of the HRRP on mortality. Estimates indicate that hospitals penalized for excess heart attack (AMI) readmissions decreased AMI readmissions by 30% and increased spending on AMI patients by 40%. This additional care had no impact on mortality. Interestingly, I find that hospitals penalized for AMI readmissions increased the quantity of care for patients with diagnoses not targeted by the HRRP. Thus the P4P incentives of the HRRP did not cause hospitals to reallocate resources away from non-targeted conditions. Hospitals penalized for excess readmissions for pneumonia or heart failure did not appear to respond to the HRRP incentives. I demonstrate using a conceptual model of hospital behavior, that as the number of patients in the targeted condition rises, the marginal cost of reducing the penalty increases by relatively more than the marginal benefit. Since HF and PN admit a relatively larger number of patients, this could increase the cost associated with amending the process of care and reducing readmissions for these conditions.
How Hospitals Responded to the Financial Incentives of the HRRP ?
In this article, I extend the analysis on the Hospital Readmission Reduction Program. I assume that hospitals form expectations about the probability of being penalized based on the relationship between past hospital performance with respect to readmissions and the HRRP penalty at the start of the program. In this approach, some hospitals that were not penalized at the start of the program still have a positive expectation of being penalized in the future. I use this expected penalty to define the treatment due to the HRRP and execute a difference in differences design to estimate the HRRP effects on all Medicare hospitals. First, I show that the correlation between the actual and expected penalties under the HRRP are close to 0.8. This confirms the suitability of using the first period penalties to define exposure to the HRRP. Secondly, I find the largest reduction in readmissions due to the HRRP to be for AMI (heart attack) patients. Specifically, hospitals reduced AMI readmission rates commensurately with expectations of future penalties. I find that only hospitals with the highest expected penalties reduced HF and PN readmissions.
The Effect of the Medicare Severity Based DRG Codes on Inpatient Care Processes and Mortality
Abstract : In 2008, the Center for Medicare and Medicaid Services (CMS) revised its existing DRG system creating a severity based DRG classification. This policy led to an increase in payments for patients with complications (judged by age, sex and secondary diagnosis/pre-existing conditions) and a decline in payments for patients with no complications. I utilize changes in reimbursement of differential magnitude across DRG codes to answer two long standing questions: 1) whether there are “real” vs “accounting” consequences of the Medicare payment change. 2) whether an increase in inpatient spending is productive. I utilize a prediction model that ex ante classifies patients into low- and high-severity groups within a DRG, along with the entire Medicare inpatient administrative data from 2002-2012. I follow patients in these groups pre- and post the payment change to assess whether the high-severity patients were more likely to be classified as high-severity than low-severity patients; whether inpatient spending increased for high- v. low-severity patients; and whether patient outcomes, for example, inpatient-mortality differed for high- v. low-severity patients.
The Implications of the End-Stage Renal Disease Quality Incentive Program (ESRD-QIP) (with Kevin Callison)
Abstract: In January 2011, the Center for Medicare and Medicaid Services (CMS) established a bundled payment system for dialysis services that provided a fixed reimbursement for each treatment to dialysis facilities. This bundled payment system resulted in a considerable reduction in the use of synthetic hormones used to raise hemoglobin levels in anemic patients. Anticipating that the incentive structure of the bundled payment might lead to more severely anemic dialysis patients, the End-stage Renal Disease Quality Incentive Program (ESRD-QIP) was implemented and reduced reimbursements by CMS to dialysis facilities failing to meet established quality standards (eg: blood hemoglobin levels). These penalties range from 0.5% to 2.0% of the facility’s annual Medicare revenue. In this article, we examine if the ESRD-QIP lead to i) changes in biometric measures for Medicare patients receiving dialysis treatment, ii) efforts by dialysis facilities to favorably select the characteristics of the patients they treat, iii) openings, closings, consolidations, and the location decisions of dialysis facilities. Using data from Medicare dialysis claims, the U.S. Renal Data System, and the CMS Dialysis Facility Compare database, We utilize two quasi-experimental approaches. Firstly, we designate “treatment” and “control” facilities based on the ex-ante risk of receiving a penalty under the ESRD-QIP. We then implemenet a difference in differences design and estimate the effect of the ESRD-QIP by comparing the performance of facilities in our treatment group against those in our control group. Secondly, we exploit the structure of the ESRD-QIP penalty scoring to implement a regression discontinuity design. Our research adds to the growing literature on the effectiveness of quality incentive programs and allows us to test the effects of such programs in the context of the heavily consolidated dialysis market setup.
Hepatitis C and Human Capital Investments: Evidence from the World’s Largest Hepatitis C Epidemic
Abstract: Egypt has the highest hepatitis C virus (HCV) prevalence in the world (14.75%). This epidemic is attributed to a nationwide intravenous vaccination campaign for Parenteral Antischistosomal Therapy (PAT) that was carried out between 1950 and 1985. Until 1985, the Egyptian government vaccinated individuals above the age of 5 using unsterilized reusable needles, leading to a significant spread of HCV infections. The PAT vaccination intensity varied across regions, with areas closest to the Nile river having the highest exposure. In 1985, an oral vaccine for PAT became available. I evaluate the effect of the hepatitis C epidemic on health investments, education decisions, and wages by combining differences across regions in the PAT intravenous vaccine intensity with differences across age cohorts induced by the introduction of the oral PAT vaccine.
Work in Progress
The Effects of Medicare’s Performance Pay Policies on Privately Insured Patients
(with Robert Kaestner & Cuiping Schiman)
Can the Quality of Post-Discharge Care Explain the Racial Disparities in Hospital Readmission Rates?