Promoting Collaborative Care: Relative Performance-based Payment Models for Hospitals and Post-acute Care Providers

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Promoting Collaborative Care: Relative Performance-based Payment Models for Hospitals and Post-acute Care Providers

Arifoglu, Kenan; Ren, Hang; Tezcan, Tolga; (2023) Promoting Collaborative Care: Relative Performance-based Payment Models for Hospitals and Post-acute Care Providers. SSRN: Rochester, NY, USA. Green open access

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Abstract

Diagnosis-Related Group (DRG) and bundled payment models are widely used in healthcare reimbursement by entities like the Centers for Medicare & Medicaid Services (CMS) and insurance companies. However, these models were primarily designed for conditions managed by a single healthcare provider in a centralized manner, often overlooking the complexities of cases requiring post-acute care (PAC) following an initial hospital stay. This can result in inadequate incentives for effective care coordination between hospitals and PAC providers, especially when treatment decisions are decentralized. Motivated by the Comprehensive Care for Joint Replacement (CJR) payment model recently introduced by CMS, which holds hospitals accountable for the quality and cost of the entire CJR episode, including the cost of PAC, we propose simple payment models that incentivize hospitals and PAC providers to collaboratively enhance the cost efficiency and quality of care for such conditions. Our approach extends traditional payment models by introducing performance targets for all providers, encompassing the entire care episode. Using a game-theoretical model, we demonstrate that the proposed payment model elicits socially optimal actions from all providers, under various assumptions. Importantly, our models do not require detailed knowledge of the hospital-PAC network structure but rely solely on observed cost and quality outcomes within the entire system. Furthermore, while the CJR payment model represents a positive step forward, our analysis reveals potential areas for improvement. Speciﬁcally, we suggest that holding both hospitals and PAC providers ﬁnancially accountable, instead of solely focusing on hospitals, would yield further enhancements in the care delivery model.

Type:	Working / discussion paper
Title:	Promoting Collaborative Care: Relative Performance-based Payment Models for Hospitals and Post-acute Care Providers
Open access status:	An open access version is available from UCL Discovery
Publisher version:	https://dx.doi.org/10.2139/ssrn.4581295
Language:	English
Additional information:	This version is the version of record. For information on re-use, please refer to the publisher’s terms and conditions.
Keywords:	Healthcare, regulation, information asymmtry, coordination, payment models
UCL classification:	UCL UCL > Provost and Vice Provost Offices > UCL BEAMS UCL > Provost and Vice Provost Offices > UCL BEAMS > Faculty of Engineering Science UCL > Provost and Vice Provost Offices > UCL BEAMS > Faculty of Engineering Science > UCL School of Management
URI:	https://discovery-pp.ucl.ac.uk/id/eprint/10177515