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2018 Conference Presentation

Outcomes and quality United States

11 September 2018

How Hospitals that are Integrated with Long-term Care Providers Respond to Pay-for-Performance Incentives

Edward Norton, University of Michigan, United States

Emily Lawton, University of Michigan, United States
Jun Li, University of Michigan, United States


Background: In prior research about the Hospital Value-Based Purchasing program (Norton et al., JHE in press) we showed that hospitals that have greater marginal incentives improved their performance over time. Interestingly, integrated hospitals responded more than non-integrated hospitals.

Methods and objectives: Our cross-sectional analysis raised additional questions about how integrated hospitals respond to incentives over a longer period of time. In this paper, we document how hospitals increased integration with skilled nursing facilities, home health care, and other long-term care providers from 2015–2018. This time period corresponds to the early years of the HVBP program, which provides incentives for hospitals to integrate with long-term care provides to ensure higher quality of post-discharge care at lower cost. Integration between hospitals and long-term care providers can help achieve this goal.

We address additional questions about how integrated hospitals responded to financial incentives to improve quality of care and lower episode payments, including payments to long-term care providers up to 30-days post discharge. These questions include, whether hospitals respond to lagged incentives more than current incentives, whether there are increasing or decreasing returns to incentives, and whether there are spillover effects from related pay-for-performance programs. In this analysis we study the 2,688 hospitals that have complete records over four years.

Results: Our results find that integrated hospitals are more responsive to economic incentives than non-integrated hospitals. The results are sensitive to the functional form, implying that there are diminishing returns to incentives. Integrated hospitals may be more efficient at improving quality and holding down costs post-discharge, and in the long run more hospitals may become more integrated.

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