Ownership and Contracting for Quality Health Care

Harvard University, Cambridge MA

Investigators

Linked publications & trials

Abstract

DESCRIPTION (Provided by Applicant): The Institute of Medicine (IOM) 2001 report "Crossing the Quality Chasm: A New Health System for the 21st Century" emphasizes the need for improved understanding and use of payment incentives and organizational structures. The project "Ownership and Contracting for Quality Health Care" seeks to contribute theoretical frameworks to the broader effort of "crossing the quality chasm." In the U.S. and many other countries, policymakers confront the challenge of regulating and purchasing health care from a delivery system that features a mixture of ownership forms. Regulatory challenges include whether to modify or withdraw tax exemptions for nonprofit providers and how to achieve appropriate public oversight of ownership conversions. For purchasers such as Medicare, critical questions include how and with whom to contract. These regulatory and purchasing decisions should be informed by economic theory and empirical evidence. Most rigorous analysis of different ownership forms suggests differences in fundamental motivations and constraints. Yet much empirical evidence, particularly recent evidence of provider behavior in the increasingly competitive US healthcare setting, reveals substantial convergence of behavior across organizational forms. The project seeks to reconcile theory and evidence by providing a rigorous theoretical model of quality provision by for-profit, nonprofit, and public providers, and to use this theory to analyze how purchasers should design contracts with consumers, plans, and providers to assure quality health care at a reasonable cost. The project has two components. The first is a theoretical analysis of the incentives affecting quality choices and cost-control efforts, and how these incentives vary with ownership form. Allowing for dynamic considerations and for competition among providers erases many of the theoretical reasons for disparities in behavior, at least between for-profit and nonprofit providers. The second component will develop a theoretical framework for analyzing how premium payment systems interact with provider payment to affect quality, cost and access.