Impact of an Episode-Based Payment Initiative by Commercial Payers in Arkansas on Procedure Volume: an Observational Study
Episode-based payment (EBP) is gaining traction among payers as an alternative to fee-for-service reimbursement. However, there is concern that EBP could influence the number of episodes.
To examine how procedure volume changed after the introduction of EBP in 2013 and 2014 under the Arkansas Health Care Payment Improvement Initiative.
Using 2011–2016 commercial claims data, we estimate a difference-in-differences model to assess the impact of EBP on the probability of a beneficiary having an episode for four procedures that were reimbursed under EBP in Arkansas: total joint replacement, cholecystectomy, colonoscopy, and tonsillectomy.
Commercially insured beneficiaries in Arkansas serve as our treatment group, while commercially insured beneficiaries in neighboring states serve as our comparison group.
Statewide implementation of EBP for various clinical conditions by two of Arkansas’ largest commercial insurers.
For a given procedure type, the primary outcomes are the annual rate of procedures (number of procedures per 1000 beneficiaries) and the probability of a beneficiary undergoing that procedure in a given quarter.
The relationship between EBP and procedure volume varies across procedures. After EBP was implemented, the probability of undergoing colonoscopy increased by 17.2% (point estimate, 2.63; 95% CI, 1.18 to 4.08; p < 0.001; Arkansas pre-period mean, 15.29). The probability of undergoing total joint replacement increased by 9.9% (point estimate, 0.091; 95% CI, − 0.011 to 0.19; p = 0.08; Arkansas pre-period mean, 0.91), though this effect is not significant. There is no discernable impact on cholecystectomy or tonsillectomy volume.
We do not find clear evidence of deleterious volume expansion. However, because the impact of EBP on procedure volume may vary by procedure, payers planning to implement EBP models should be aware of this possibility.
KEY WORDSreimbursement physician behavior health insurance health policy health economics
Research reported in this study was financially supported by a grant from the Laura and John Arnold Foundation.
Compliance with Ethical Standards
Conflict of Interest
Dr. Chernew reports having equity in Archway Health, V-BID Health, Virta Health, and Paladin Healthcare Capital. He reports having consulted for the American Hospital Association, Anthem Health Insurance, Janssen Pharmaceuticals, Madalena Consulting, Merck & Company, Milliman, Navigant, Pfizer, PhRMA, Precision Health Economics, State of North Carolina, Takeda Pharmaceuticals, University of Michigan, White & Case, Amgen, J&J, Sanofi, University of Maine, McKinsey & Company, and John Freedman Healthcare. He has received research funding from the Laura and John Arnold Foundation, NIH/NIA, NBER/AHRQ, CMS via Abt Associates, MITRE/CMS, Altarum/RWJK, Peterson Center on Health Care, and The Commonwealth Fund. Dr. Fendrick reports having consulted for AbbVie, Amgen, Centivo, Community Oncology Association, Department of Defense, EmblemHealth, Exact Sciences, Freedman Health, Health at Scale Technologies, Health Management Associates, Lilly, MedZed, Penguin Pay, Risalto, Sempre Health, State of Minnesota, Wellth, and Zansors. He has received research funding from AHRQ, Boehringer-Ingelheim, Gary and Mary West Health Policy Center, Laura and John Arnold Foundation, National Pharmaceutical Council, PCORI, PhRMA, RWJ Foundation, and State of Michigan/CMS. All other authors report no relationships or potential conflicts of interest.
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