Financial incentives and prescribing behavior in primary care.

Many healthcare systems prohibit primary care physicians from dispensing the drugs they prescribe due to concerns that this encourages excessive, ineffective or unnecessarily costly prescribing. Using data from the English National Health Service for 2011-2018, we estimate the impact of physician dispensing rights on prescribing behavior at the extensive margin (comparing practices that dispense and those that do not) and the intensive margin (comparing practices with different proportions of patients to whom they dispense). We control for practices selecting into dispensing based on observable (OLS, entropy balancing) and unobservable practice characteristics (2SLS). We find that physician dispensing increases drug costs per patient by 3.1%, due to more, and more expensive, drugs being prescribed. Reimbursement is partly based on a fixed fee per package dispensed and we find that dispensing practices prescribe smaller packages. As the proportion of the practice population for whom they can dispense increases, dispensing practices behave more like non-dispensing practices.

Impact of prevention in primary care on costs in primary and secondary care for people with serious mental illness.

A largely unexplored part of the financial incentive for physicians to participate in preventive care is the degree to which they are the residual claimant from any resulting cost savings. We examine the impact of two preventive activities for people with serious mental illness (care plans and annual reviews of physical health) by English primary care practices on costs in these practices and in secondary care. Using panel two-part models to analyze patient-level data linked across primary and secondary care, we find that these preventive activities in the previous year are associated with cost reductions in the current quarter both in primary and secondary care. We estimate that there are large beneficial externalities for which the primary care physician is not the residual claimant: the cost savings in secondary care are 4.7 times larger than the cost savings in primary care. These activities are incentivized in the English National Health Service but the total financial incentives for primary care physicians to participate were considerably smaller than the total cost savings produced. This suggests that changes to the design of incentives to increase the marginal reward for conducting these preventive activities among patients with serious mental illness could have further increased welfare.

Optimal hospital payment rules under rationing by waiting.

We derive optimal rules for paying hospitals for non-emergency care when providers choose quality and capacity, and patient demand is rationed by waiting time. Waiting for treatment is costly for patients, so that hospital payment rules should take account of their effect on waiting time as well as on quality. Since deterministic waiting time models imply that profit maximising hospitals will never choose to have both positive quality and positive waiting time, we develop a stochastic model of rationing by waiting in which both quality and expected waiting are positive in equilibrium. We use it to show that, although a prospective output price gives hospitals an incentive to attract patients by raising quality and reducing waiting times, it must be supplemented by a price attached to hospital decisions on quality or capacity or to a performance indicator which depends on those decisions (such as average waiting time, or average length of stay). A prospective output price by itself can support the optimal quality and waiting time distribution only if the welfare function respects patient preferences over quality and waiting time, if patients' marginal rates of substitution between quality and waiting time are independent of income, and if waiting for treatment does not reduce the productivity of patients. If these conditions do not hold, supplementing the output price with a reward linked to the hospital's cost can increase welfare, though it is possible that costs should be taxed rather than subsidised.

Relationship between general practice capitation funding and the quality of primary care in England: a cross-sectional, 3-year study.

OBJECTIVE: To explore the relationship between general practice capitation funding and quality ratings based on general practice inspections. DESIGN: Cross-sectional study pooling 3 years of primary care administrative data. SETTING: UK primary care. PARTICIPANTS: 7310 practices (95% of all practices) in England which underwent Care Quality Commission (CQC) inspections between November 2014 and December 2017. MAIN OUTCOME MEASURES: CQC ratings. Ordered logistic regression methods were used to predict the relationship between practice capitation funding and CQC ratings in each of five domains of quality: caring, effective, responsive, safe and well led, together with an overall practice rating. RESULTS: Higher capitation funding per patient was significantly associated with higher CQC ratings across all five quality domains: caring (OR 1.14, 95% CI 1.04 to 1.23), effective (OR 1.08, 95% CI 1.00 to 1.16), responsive (OR 1.09, 95% CI 1.02 to 1.17), safe (OR 1.11, 95% CI 1.05 to 1.18), well led (OR 1.13, 95% CI 1.06 to 1.20) and overall rating (OR 1.13, 95% CI 1.06 to 1.19). CONCLUSION: Higher capitation funding was consistently associated with higher ratings across all CQC domains and in the overall practice rating. This study suggests that measured dimensions of the quality of care are related to the underlying capitation funding allocated to each general practice, implying that additional capitation funding may be associated with higher levels of primary care quality.

Spatial competition and quality: Evidence from the English family doctor market.

We examine whether family doctor firms in England respond to local competition by increasing their quality. We measure quality in terms of clinical performance and patient-reported satisfaction to capture its multi-dimensional nature. We use a panel covering 8 years for over 8000 English general practices. We measure competition as the number of rival doctors within a small distance and control for a large number of potential confounders. We find that increases in local competition are associated with increases in patient satisfaction and to a lesser extent in clinical quality. However, the magnitude of the effect is small.

Details matter: Physician responses to multiple payments for the same activity.

The UK Quality and Outcomes Framework rewards general practices for achieving quality indicators for chronic disease management. Some indicators are multi-rewarded. For example, there are indicators for controlling blood pressure for patients with diabetes and for patients with chronic heart disease. Thus if a patient has diabetes and heart disease the practice is rewarded twice for controlling her blood pressure. Other indicators are singly rewarded: the incentivised activity is only for patients with single specific condition. We compare general practice performance on single and multi-reward indicators. We use a 2005/6-2012/13 panel of over 800 Scottish general practices, control for practice characteristics, practice fixed effects, indicator characteristics (whether the indicator was for measurement, treatment, or intermediate outcome, maximum payment, upper thresholds), condition, and year and cluster on indicators. We find that the proportion of patients with a given condition for whom a quality indicator was achieved was higher, and the proportion who were exception reported was lower, for multi-reward indicators than for single reward indicators. We also exploit the replacement of multi-reward smoking indicators by single reward indicators in 2006/7. Compared to indicators which were always single or always multi-reward, the proportion of the relevant patients for whom the smoking indicators were achieved fell when the smoking indicators were no longer multi-reward. Fine details of pay for performance schemes matter: they affect physician behaviour and patient outcomes.

Does hospital competition improve efficiency? The effect of the patient choice reform in England.

We use the 2006 relaxation of constraints on patient choice of hospital in the English NHS to investigate the effect of hospital competition on dimensions of efficiency including indicators of resource management (admissions per bed, bed occupancy rate, proportion of day cases, and cancelled elective operations) and costs (reference cost index for overall and elective activity, cleaning services costs, laundry and linen costs). We employ a quasi differences-in-differences approach and estimate seemingly unrelated regressions and unconditional quantile regressions with data on hospital trusts from 2002/2003 to 2010/2011. Our findings suggest that increased competition had mixed effects on efficiency. An additional equivalent rival increased admissions per bed by 1.1%, admissions per doctor by 0.9% and the proportion of day cases by 0.38 percentage points, but it also increased the number of cancelled elective operations by 2.5%.

Do hospitals respond to rivals' quality and efficiency? A spatial panel econometric analysis.

We investigate whether hospitals in the English National Health Service change their quality or efficiency in response to changes in quality or efficiency of neighbouring hospitals. We first provide a theoretical model that predicts that a hospital will not respond to changes in the efficiency of its rivals but may change its quality or efficiency in response to changes in the quality of rivals, though the direction of the response is ambiguous. We use data on eight quality measures (including mortality, emergency readmissions, patient reported outcome, and patient satisfaction) and six efficiency measures (including bed occupancy, cancelled operations, and costs) for public hospitals between 2010/11 and 2013/14 to estimate both spatial cross-sectional and spatial fixed- and random-effects panel data models. We find that although quality and efficiency measures are unconditionally spatially correlated, the spatial regression models suggest that a hospital's quality or efficiency does not respond to its rivals' quality or efficiency, except for a hospital's overall mortality that is positively associated with that of its rivals. The results are robust to allowing for spatially correlated covariates and errors and to instrumenting rivals' quality and efficiency.

Policies towards hospital and GP competition in five European countries.

This study provides an overview of policies affecting competition amongst hospitals and GPs in five European countries: France, Germany, Netherlands, Norway and Portugal. Drawing on the policies and empirical evidence described in five case studies, we find both similarities and differences in the approaches adopted. Constraints on patients' choices of provider have been relaxed but countries differ in the amount and type of information that is provided in the public domain. Hospitals are increasingly paid via fixed prices per patient to encourage them to compete on quality but prices are set in different ways across countries. They can be collectively negotiated, determined by the political process, negotiated between insurers and providers or centrally determined by provider costs. Competition amongst GPs varies across countries and is limited in some cases by shortages of providers or restrictions on entry. There are varied and innovative examples of selective contracting for patients with chronic conditions aimed at reducing fragmentation of care. Competition authorities do generally have jurisdiction over mergers of private hospitals but assessing the potential impact of mergers on quality remains a key challenge. Overall, this study highlights a rich diversity of approaches towards competition policy in healthcare.

Quality target negotiation in health care: evidence from the English NHS.

We examine how public sector third-party purchasers and hospitals negotiate quality targets when a fixed proportion of hospital revenue is required to be linked to quality. We develop a bargaining model linking the number of quality targets to purchaser and hospital characteristics. Using data extracted from 153 contracts for acute hospital services in England in 2010/2011, we find that the number of quality targets is associated with the purchaser's population health and its budget, the hospital type, whether the purchaser delegated negotiation to an agency, and the quality targets imposed by the supervising regional health authority.

Determinants of hospital length of stay for people with serious mental illness in England and implications for payment systems: a regression analysis.

BACKGROUND: Serious mental illness (SMI), which encompasses a set of chronic conditions such as schizophrenia, bipolar disorder and other psychoses, accounts for 3.4 m (7 %) total bed days in the English NHS. The introduction of prospective payment to reimburse hospitals makes an understanding of the key drivers of length of stay (LOS) imperative. Existing evidence, based on mainly small scale and cross-sectional studies, is mixed. Our study is the first to use large-scale national routine data to track English hospitals' LOS for patients with a main diagnosis of SMI over time to examine the patient and local area factors influencing LOS and quantify the provider level effects to draw out the implications for payment systems. METHODS: We analysed variation in LOS for all SMI admissions to English hospitals from 2006 to 2010 using Hospital Episodes Statistics (HES). We considered patients with a LOS of up to 180 days and estimated Poisson regression models with hospital fixed effects, separately for admissions with one of three main diagnoses: schizophrenia; psychotic and schizoaffective disorder; and bipolar affective disorder. We analysed the independent contribution of potential determinants of LOS including clinical and socioeconomic characteristics of the patient, access to and quality of primary care, and local area characteristics. We examined the degree of unexplained variation in provider LOS. RESULTS: Most risk factors did not have a differential effect on LOS for different diagnostic sub-groups, however we did find some heterogeneity in the effects. Shorter LOS in the pooled model was associated with co-morbid substance or alcohol misuse (4 days), and personality disorder (8 days). Longer LOS was associated with older age (up to 19 days), black ethnicity (4 days), and formal detention (16 days). Gender was not a significant predictor. Patients who self-discharged had shorter LOS (20 days). No association was found between higher primary care quality and LOS. We found large differences between providers in unexplained variation in LOS. CONCLUSIONS: By identifying key determinants of LOS our results contribute to a better understanding of the implications of case-mix to ensure prospective payment systems reflect accurately the resource use within sub-groups of patients with SMI.

Does the quality and outcomes framework reduce psychiatric admissions in people with serious mental illness? A regression analysis.

BACKGROUND: The Quality and Outcomes Framework (QOF) incentivises general practices in England to provide proactive care for people with serious mental illness (SMI) including schizophrenia, bipolar disorder and other psychoses. Better proactive primary care may reduce the risk of psychiatric admissions to hospital, but this has never been tested empirically. METHODS: The QOF data set included 8234 general practices in England from 2006/2007 to 2010/2011. Rates of hospital admissions with primary diagnoses of SMI or bipolar disorder were estimated from national routine hospital data and aggregated to practice level. Poisson regression was used to analyse associations. RESULTS: Practices with higher achievement on the annual review for SMI patients (MH9), or that performed better on either of the two lithium indicators for bipolar patients (MH4 or MH5), had more psychiatric admissions. An additional 1% in achievement rates for MH9 was associated with an average increase in the annual practice admission rate of 0.19% (95% CI 0.10% to 0.28%) or 0.007 patients (95% CI 0.003 to 0.01). CONCLUSIONS: The positive association was contrary to expectation, but there are several possible explanations: better quality primary care may identify unmet need for secondary care; higher QOF achievement may not prevent the need for secondary care; individuals may receive their QOF checks postdischarge rather than prior to admission; individuals with more severe SMI may be more likely to be registered with practices with better QOF performance; and QOF may be a poor measure of the quality of care for people with SMI.

Quality of Disease Management and Risk of Mortality in English Primary Care Practices.

OBJECTIVE: To investigate whether better management of chronic conditions by family practices reduces mortality risk. DATA: Two random samples of 5 million patients registered with over 8,000 English family practices followed up for 4 years (2004/5-2007/8). Measures of the quality of disease management for 10 conditions were constructed for each family practice for each year. The outcome measure was an indicator taking the value 1 if the patient died during a specified year, 0 otherwise. STUDY DESIGN: Cross-section and multilevel panel data multiple logistic regressions were estimated. Covariates included age, gender, morbidity, hospitalizations, attributed socio-economic characteristics, and local health care supply measures. PRINCIPAL FINDINGS: Although a composite measure of the quality of disease management for all 10 conditions was significantly associated with lower mortality, only the quality of stroke care was significant when all 10 quality measures were entered in the regression. CONCLUSIONS: The panel data results suggest that a 1 percent improvement in the quality of stroke care could reduce the annual number of deaths in England by 782 [95 percent CI: 423, 1140]. A longer study period may be necessary to detect any mortality impact of better management of other conditions.

Effect of a national primary care pay for performance scheme on emergency hospital admissions for ambulatory care sensitive conditions: controlled longitudinal study.

OBJECTIVE: To estimate the impact of a national primary care pay for performance scheme, the Quality and Outcomes Framework in England, on emergency hospital admissions for ambulatory care sensitive conditions (ACSCs). DESIGN: Controlled longitudinal study. SETTING: English National Health Service between 1998/99 and 2010/11. PARTICIPANTS: Populations registered with each of 6975 family practices in England. MAIN OUTCOME MEASURES: Year specific differences between trend adjusted emergency hospital admission rates for incentivised ACSCs before and after the introduction of the Quality and Outcomes Framework scheme and two comparators: non-incentivised ACSCs and non-ACSCs. RESULTS: Incentivised ACSC admissions showed a relative reduction of 2.7% (95% confidence interval 1.6% to 3.8%) in the first year of the Quality and Outcomes Framework compared with ACSCs that were not incentivised. This increased to a relative reduction of 8.0% (6.9% to 9.1%) in 2010/11. Compared with conditions that are not regarded as being influenced by the quality of ambulatory care (non-ACSCs), incentivised ACSCs also showed a relative reduction in rates of emergency admissions of 2.8% (2.0% to 3.6%) in the first year increasing to 10.9% (10.1% to 11.7%) by 2010/11. CONCLUSIONS: The introduction of a major national pay for performance scheme for primary care in England was associated with a decrease in emergency admissions for incentivised conditions compared with conditions that were not incentivised. Contemporaneous health service changes seem unlikely to have caused the sharp change in the trajectory of incentivised ACSC admissions immediately after the introduction of the Quality and Outcomes Framework. The decrease seems larger than would be expected from the changes in the process measures that were incentivised, suggesting that the pay for performance scheme may have had impacts on quality of care beyond the directly incentivised activities.

Patient choice, mobility and competition among health care providers.

Policymakers are increasingly designing policies that encourage patient choice and therefore mobility across providers. Since prices are regulated (fixed) in most countries, providers need to compete on quality to attract patients. This chapter reviews the current theoretical and empirical literature on patient choice and quality competition in health markets. The theoretical literature identifies key factors affecting incentives to provide quality. These include: altruistic motives, cost structure, number of providers, demand responsiveness, GP gatekeeping, degree of specialization, profit constraints and soft budgets. We also review the theoretical literature on choice across different countries (e.g. within the EU) or regions within the same countries. The chapter reviews selected empirical studies that investigate whether demand responds to quality and waiting times, the role of patient's mobility and the effect of competition on quality.

Keep it simple? Predicting primary health care costs with clinical morbidity measures.

Models of the determinants of individuals' primary care costs can be used to set capitation payments to providers and to test for horizontal equity. We compare the ability of eight measures of patient morbidity and multimorbidity to predict future primary care costs and examine capitation payments based on them. The measures were derived from four morbidity descriptive systems: 17 chronic diseases in the Quality and Outcomes Framework (QOF); 17 chronic diseases in the Charlson scheme; 114 Expanded Diagnosis Clusters (EDCs); and 68 Adjusted Clinical Groups (ACGs). These were applied to patient records of 86,100 individuals in 174 English practices. For a given disease description system, counts of diseases and sets of disease dummy variables had similar explanatory power. The EDC measures performed best followed by the QOF and ACG measures. The Charlson measures had the worst performance but still improved markedly on models containing only age, gender, deprivation and practice effects. Comparisons of predictive power for different morbidity measures were similar for linear and exponential models, but the relative predictive power of the models varied with the morbidity measure. Capitation payments for an individual patient vary considerably with the different morbidity measures included in the cost model. Even for the best fitting model large differences between expected cost and capitation for some types of patient suggest incentives for patient selection. Models with any of the morbidity measures show higher cost for more deprived patients but the positive effect of deprivation on cost was smaller in better fitting models.

Does a hospital's quality depend on the quality of other hospitals? A spatial econometrics approach.

We examine whether a hospital's quality is affected by the quality provided by other hospitals in the same market. We first sketch a theoretical model with regulated prices and derive conditions on demand and cost functions which determine whether a hospital will increase its quality if its rivals increase their quality. We then apply spatial econometric methods to a sample of English hospitals in 2009-10 and a set of 16 quality measures including mortality rates, readmission, revision and redo rates, and three patient reported indicators, to examine the relationship between the quality of hospitals. We find that a hospital's quality is positively associated with the quality of its rivals for seven out of the sixteen quality measures. There are no statistically significant negative associations. In those cases where there is a significant positive association, an increase in rivals' quality by 10% increases a hospital's quality by 1.7% to 2.9%. The finding suggests that for some quality measures a policy which improves the quality in one hospital will have positive spillover effects on the quality in other hospitals.

Implications of comorbidity for primary care costs in the UK: a retrospective observational study.

BACKGROUND: Comorbidity is increasingly common in primary care. The cost implications for patient care and budgetary management are unclear. AIM: To investigate whether caring for patients with specific disease combinations increases or decreases primary care costs compared with treating separate patients with one condition each. DESIGN: Retrospective observational study using data on 86 100 patients in the General Practice Research Database. METHOD: Annual primary care cost was estimated for each patient including consultations, medication, and investigations. Patients with comorbidity were defined as those with a current diagnosis of more than one chronic condition in the Quality and Outcomes Framework. Multiple regression modelling was used to identify, for three age groups, disease combinations that increase (cost-increasing) or decrease (cost-limiting) cost compared with treating each condition separately. RESULTS: Twenty per cent of patients had at least two chronic conditions. All conditions were found to be both cost-increasing and cost-limiting when co-occurring with other conditions except dementia, which is only cost-limiting. Depression is the most important cost-increasing condition when co-occurring with a range of conditions. Hypertension is cost-limiting, particularly when co-occurring with other cardiovascular conditions. CONCLUSION: Three categories of comorbidity emerge, those that are: cost-increasing, mainly due to a combination of depression with physical comorbidity; cost-limiting because treatment for the conditions overlap; and cost-limiting for no apparent reason but possibly because of inadequate care. These results can contribute to efficient and effective management of chronic conditions in primary care.

Family doctor responses to changes in incentives for influenza immunization under the U.K. Quality and Outcomes Framework pay-for-performance scheme.

OBJECTIVE: To analyze the effect of setting higher targets, in a primary care pay-for-performance scheme, on rates of influenza immunization and exception reporting. STUDY SETTING: The U.K. Quality and Outcomes Framework links financial rewards for family practices to four separate influenza immunization rates for patients with coronary heart disease (CHD), chronic obstructive pulmonary disease, diabetes, and stroke. There is no additional payment for immunization rates above an upper threshold. Patients for whom immunization would be inappropriate can be excepted from the practice for the calculation of the practice immunization rate. DATA: Practice-level information on immunizations and exceptions extracted from electronic records of all practices in England 2004/05 to 2009/10 (n=8,212-8,403). STUDY DESIGN: Longitudinal random effect multilevel linear regressions comparing changes in practice immunization and exception rates for the four chronic conditions before and after the increase in the upper threshold immunization rate for CHD patients in 2006/07. PRINCIPAL FINDINGS: The 5 percent increase in the upper payment threshold for CHD was associated with increases in the proportion of immunized CHD patients (0.41 percent, CI: 0.25-0.56 percent), and exception was reported (0.26 percent, CI: 0.12-0.40 percent). CONCLUSIONS: Making quality targets more demanding can not only lead to improvement in quality of care but can also have other consequences.

A person based formula for allocating commissioning funds to general practices in England: development of a statistical model.

OBJECTIVES: To develop a formula for allocating resources for commissioning hospital care to all general practices in England based on the health needs of the people registered in each practice DESIGN: Multivariate prospective statistical models were developed in which routinely collected electronic information from 2005-6 and 2006-7 on individuals and the areas in which they lived was used to predict their costs of hospital care in the next year, 2007-8. Data on individuals included all diagnoses recorded at any inpatient admission. Models were developed on a random sample of 5 million people and validated on a second random sample of 5 million people and a third sample of 5 million people drawn from a random sample of practices. SETTING: All general practices in England as of 1 April 2007. All NHS inpatient admissions and outpatient attendances for individuals registered with a general practice on that date. SUBJECTS: All individuals registered with a general practice in England at 1 April 2007. MAIN OUTCOME MEASURES: Power of the statistical models to predict the costs of the individual patient or each practice's registered population for 2007-8 tested with a range of metrics (R(2) reported here). Comparisons of predicted costs in 2007-8 with actual costs incurred in the same year were calculated by individual and by practice. RESULTS: Models including person level information (age, sex, and ICD-10 codes diagnostic recorded) and a range of area level information (such as socioeconomic deprivation and supply of health facilities) were most predictive of costs. After accounting for person level variables, area level variables added little explanatory power. The best models for resource allocation could predict upwards of 77% of the variation in costs at practice level, and about 12% at the person level. With these models, the predicted costs of about a third of practices would exceed or undershoot the actual costs by 10% or more. Smaller practices were more likely to be in these groups. CONCLUSIONS: A model was developed that performed well by international standards, and could be used for allocations to practices for commissioning. The best formulas, however, could predict only about 12% of the variation in next year's costs of most inpatient and outpatient NHS care for each individual. Person-based diagnostic data significantly added to the predictive power of the models.