Project Summary The goal of our proposed research is to provide evidence of how pay-for-performance and expanded insurance coverage affect: (1) hospital financial performance, (2) hospital quality, and (3) access to care. Each aim of our proposed research is designed to address an element of these interrelated factors. We examine data collected before and after the Patient Protection and Affordable Care Act (ACA). The ACA's goal, as originally intended, was to increase health insurance coverage through a combination of a health insurance mandate, expanded eligibility for Medicaid, and subsidized private coverage through private exchanges. Hospitals, in turn, were given incentives based on readmission rates, hospital-acquired infections, and a composite measure of value based on patient safety, mortality, satisfaction, and other factors. The pay-for-performance incentives were designed in the context of large increases in health insurance coverage that would improve hospital's bottom line and enable them to invest in quality improvement and avoid future penalties for poor performance. Some states, however, chose not to expand Medicaid. The role of pay-for-performance incentives in the context of the expanded health insurance coverage is a primary focus of our research. It is costly for hospitals to invest in quality improvement, and a hospital's ability to take advantage of the pay-for-performance incentives depends on a financially viable business model. We focus our analysis of pay-for-performance on two programs: the Hospital Readmission Reduction Program and the Hospital-Acquired Condition Reduction Program. We do so because the thresholds to determine penalties used in these programs are suited for a regression discontinuity design that can yield causal estimates of the effect of these programs. Hospitals have a strong incentive to perform well on the targeted measures, especially at hospitals with a high share of Medicare patients, but not all hospitals have the financial resources or management skill to invest in quality improvement, especially when the processes to improve on the targeted measures are not well defined. It is important to understand the impact of these large changes on the viability of the hospital industry. Access to hospital care is a function of the financial viability in a market- based health care system. An important aspect of a market-based system is survival of firms. Even in a well- functioning market there is turnover within which high performers are rewarded and poor performers close. However, absent a price mechanism that provides incentives to increase access where it is needed most, it is important to understand whether hospital closures are due to poor performance or a symptom of market distortions in which not even the most efficient hospital could survive. We propose to test whether this is the case by examining the impact of closures before and after the ACA to determine whether the penalties are too strong in the absence of expanded health insurance coverage.

R01HS025208

2017-04-01

2021-03-31