Understanding the Impact of Incentive-Driven Changes in Hospital and Physician Practice Styles

This dissertation consists of three chapters that investigate impact of incentive changes on hospital and physician practice styles, as well as patient outcomes. In an effort to curb the escalating healthcare expenditure, the Center for Medicare \& Medicaid Innovation has introduced several alternative payment models, which have garnered significant attention in numerous studies with varied findings. This first chapter introduces the focal point of this thesis, namely the Comprehensive Care for Joint Replacement (CJR) model, and provides a review of pertinent studies that have examined this model and related areas. Specifically, this chapter reviews and summarizes the findings from studies that have investigated the Bundled Payments for Care Improvement (BPCI) Initiative, the CJR Model, and other alternative payment models. In the second section of this chapter, a conceptual model is developed that emulates the CJR Model and provides predictions of potential model effects. The second chapter explores and examines the mechanisms through which hospitals, as healthcare providers, respond to the incentive changes brought about by a Medicare payment innovation. The estimation results, derived from an extended difference-in-differences (DiD) framework that includes chronic or geographical controls, reveal the general and spillover effects of the Medicare policy on the targeted patients, non-targeted privately insured patients, and non-targeted patients undergoing related procedures. To examine the policy mechanisms, an econometric specification by extending the DiD method with Bartik-like instruments is developed, enabling the exploration of policy effect heterogeneity across various dimensions according to the conceptual model. The findings indicate that hospitals' responses to the policy are contingent upon their capacity in terms of discharge supplies and business patterns: greater accessibility and experience in specific discharges are associated with increased utilization, whereas the opposite leads to ...