Incentive Mechanism Design Of Medical Payment Models For Readmissions Reduction

To induce readmissions reduction efforts,rein in costs as well as reverse the incentive from high volume of care to efficient care,policy makers have been testing various arguably healthcare payment models for long ages.Among these,bundled payment(BP)and prospective payment system(PPS)are receiving substantial attention worldwide,being regarded as promising reform pilots compared with traditional feefor-service(FFS)payment model.To examine the effectiveness of payment models,we develop an analytical model with a funder and a hospital,in which the government chooses a medical payment model(BP,pure PPS or PPS with HRRP)and determines the amount of payment,then the hospital decides its effort level to maximize its expected benefits based on the medical payment model offered,finally,the patient readmission rate with uncertainty is achieved.Our findings confirm that,compared to the traditional FFS and pure PPS,under BP,the government can obtain the lowest monetary transfer,the highest effort level and the highest government payoffs,but can not coordinate to the system optimum.At the same time,the pure PPS could not align the incentive problem to achieve system optimization although it is better off from FFS in terms of effort level,monetary transfer and government payoffs.Further,the results show that PPS with HRRP can motivate the hospital to exert a higher effort level when the potential losses in the second phase is small,and coordinate to the system optimum in some circumstances.When the potential losses are large,PPS with HRRP degenerates into pure PPS as a result of the penalty mechanism works off.In this case,BP completely dominates PPS with HRRP.Finally,the extension of PPS with HRRP shows that some fairly minor modifications of the PPS with HRRP could improve its performance,reduce its shortcomings,assimilate the superiority of BP and provide more regulatory space for the government.