title: Effects of payment reform in more versus less competitive markets.
abstract: Policymakers are increasingly interested in reducing healthcare costs and inefficiencies through innovative payment strategies. These strategies may have heterogeneous impacts across geographic areas, potentially reducing or exacerbating geographic variation in healthcare spending. In this paper, we exploit a major payment reform for home health care to examine whether reductions in reimbursement lead to differential changes in treatment intensity and provider costs depending on the level of competition in a market. Using Medicare claims, we find that while providers in more competitive markets had higher average costs in the pre-reform period, these markets experienced larger proportional reductions in treatment intensity and costs after the reform relative to less competitive markets. This led to a convergence in spending across geographic areas. We find that much of the reduction in provider costs is driven by greater exit of "high-cost" providers in more competitive markets.
authors.affiliation: University of Southern California, 635 Downey Way, Verna & Peter Dauterive Hall (VPD), 2nd Floor, Los Angeles, CA 90089-3333, United States; National Bureau of Economic Research, 1050 Massachusetts Ave., Cambridge, MA 02138, United States. Electronic address: nsood@healthpolicy.usc.edu.
authors.forename: Neeraj
authors.initials: N
authors.lastname: Sood
authors.affiliation: The Wharton School, University of Pennsylvania, 3641 Locust Walk, Philadelphia, PA, 19104, United States. Electronic address: alpertab@wharton.upenn.edu.
authors.forename: Abby
authors.initials: A
authors.lastname: Alpert
authors.affiliation: University of Southern California, 635 Downey Way, Verna & Peter Dauterive Hall (VPD), 2nd Floor, Los Angeles, CA 90089-3333, United States. Electronic address: kayleigb@healthpolicy.usc.edu.
authors.forename: Kayleigh
authors.initials: K
authors.lastname: Barnes
authors.affiliation: University of Minnesota, 420 Delaware Street SE, 15-226 PWB, MMC 729, Minneapolis MN 55455, United States. Electronic address: huckfeld@umn.edu.
authors.forename: Peter
authors.initials: P
authors.lastname: Huckfeldt
authors.affiliation: University of California, Los Angeles, BOX 951736, 911 Broxton Los Angeles, CA 90095-1736, United States. Electronic address: jescarce@mednet.ucla.edu.
authors.forename: José J
authors.initials: JJ
authors.lastname: Escarce
mesh_terms: D004465:Economic Competition / Q000191:economics*; D017048:Health Care Costs; D018166:Health Care Reform / Q000191:economics*; D019981:Health Care Sector / Q000191:economics* / Q000458:organization & administration; D006801:Humans; D006278:Medicare / Q000191:economics; D012051:Reimbursement Mechanisms / Q000191:economics* / Q000458:organization & administration; D014481:United States
keywords: Competition; Geographic variation; Home health care; Medicare; Payment reform; Prospective payment