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There has been increased interest in expanding the Medicare Prospective Payment System (PPS) to non-Medicare payers to provide incentives for hospitals to contain costs and to concentrate in those Diagnosis-Related Groups (DRGs) which they can provide efficiently. However, this should not force low-volume, low-cost payers to subsidize high cost payers and should not penalize low Length-of-Stay (LOS), low-cost hospitals. This article proposes a new method proportional pricing to expand PPS incentives to non-Medicare payers with equity for payers and hospitals. It would also allow all-payer rate setting and premium price competition among payers to coexist.

To survey the policy-driven financial controls currently being used to drive physician change in the care of populations

This paper offers a review of current health care payment models and discusses the impact of each on the potential success of PHM initiatives. We present the benefits of a multi-part model, combining visit-based fee-for-service reimbursement with a monthly “care coordination payment” and a performance-based payment system.

A multi-part model removes volume-based incentives and promotes efficiency. However, it is predicated on a pay-for-performance framework that requires standardized measurement. Application of this model is limited due to the current lack of standardized measurement of quality goals that are linked to payment incentives.

Financial models dictated by health system payers are inextricably linked to the organization and management of health care.

There is a need for better measurements and realistic targets as part of a comprehensive system of measurement assessment that focuses on practice redesign, with the goal of standardizing measurement of the structure and process of redesign. Payment reform is a necessary component of an accurate measure of the associations between practice transformation and outcomes important to both patients and society.

In October 1983, a new hospital payment system was introduced in the United States which was a radical departure from traditional methods of reimbursement. Concern over continuing increases in expenditures for hospital care caused Medicare to replace its ‘cost based’ reimbursement system, in which hospital payments were based on the actual costs incurred in treating patients, with a system that pays hospitals a fixed price per case. If a patient's treatment plan costs less than the fixed rate, the hospital may keep the difference; but if its costs in providing services exceed the rate, the hospital must absorb the loss.

The context in which an innovation is implemented is an important and often neglected mediator of change. A prospective payment system (PPS) for psychiatric and psychosomatic facilities with major implications for inpatient psychiatric care in Germany was implemented from 2013 to 2017. This study aims to examine the determinants of implementation of this government policy using the Diffusion of Innovations theory and consider the role of context.

An exploratory case study was conducted in two wards of a psychiatric hospital in Germany: geriatric psychiatry (GerP) and general psychiatry (GenP). Fifteen interviews were conducted with different occupational groups and analyzed in-depths. Routine hospital data were analyzed for delimiting the two contexts.

Routine hospital data show a higher day-mix index (1.08 vs. 0.94) in the GerP context and a very different structure regarding PPS groups, indicating a higher patient complexity. Two types of factors influencing implementation were identified: Context-independent factors included social separation between nurses and doctors, poor communication behavior between the groups and a lack of conveying information about the underlying principles of the PPS. Context-dependent factors included compatibility of the new requirements with existing routines and the relative advantage of the PPS, which were both perceived to be lower in the GerP context.

Depending on the patient characteristics in the specific context, compatibility with existing routines should be ensured when implementing. Clear communication of the underlying principles and reduction of organizational and communicative barriers between professional groups are crucial success factors for implementing such innovations.

This study shows how a diffusion process takes place in an organization even after the organization adopts an innovation. The authors could show how contextual differences in terms of patient characteristics result in different determinants of implementation from the views of the employees affected by the innovation.

Purpose – This chapter discusses the relationship between health insurance and hospitals’ decisions to adopt medical technologies. I focus on both how the extent of insurance coverage can increase incentives to adopt new treatments, and how the parameters of the insurance contract can impact the types of treatments adopted.

Methodology/approach – I provide a review of the previous theoretical and empirical literature and highlight evidence on this relationship from previous expansions of Medicaid eligibility to low-income pregnant women.

Findings – While health insurance has important effects on individual-level choices of health care consumption, increases in the fraction of the population covered by insurance has also been found to have broader supply side effects as hospitals respond to changes in demand by changing the type of care offered. Furthermore, hospitals respond to the design of insurance contracts and adopt more or less cost-effective technologies depending on the incentive system.

Research limitations/implications – Understanding how insurance changes supply side incentives is important as we consider future changes in the insurance landscape.

Originality/value of paper – With these previous findings in mind, I conclude with a discussion of how the Affordable Care Act may alter hospital technology adoption incentives by both expanding coverage and changing payment schemes.

Whereas many researchers have examined the way in which health institutions have been transformed through funding modalities, and particularly through prospective payment systems (PPS), few have investigated the architecture of these systems, that is, costs and cost variance. Focusing on the study of costs and on the production of hospital rates, this chapter shows that the French PPS, called “rate per activity” made possible what we call a policy of variance. For health policymakers, the aim was to make the different accounting figures between hospitals, and between ways of practising healthcare, visible, in order to reduce these variances. This policy was attended by uncertainty in the processes of quantification, which led to metrological controversies. As a consequence of the issues around the way of calculating costs, some accounts and calculations were redone. In this chapter, we consider the case of metrological controversy over the remuneration of costs for cystic fibrosis patients’ hospital stays, and over the action of a patient organization that criticized the costs calculated officially. It leads to the analysis of the way calculative infrastructures, as cost accounting and rates, are challenged, and how some actors try to stabilize them.

Bundled payments for care are an efficient mechanism to align payer, provider, and patient incentives in the provision of health care services for an episode of care. In this chapter, we use agency theory to examine the evolution of bundled payment programs in private and public payer arrangements, and postulate future directions for bundled payment development as a key component in the provision and payment of health care services.

This study aims to provide insights into management accounting changes (MACs) and potential roles of big data analytics (BDA) in accelerating the MACs in an Indonesian public hospital as a response towards the adoption of the diagnosis-related groups (DRG)-based payment system.

A mixed-method approach was used to collect and analyse data from a referral public hospital in Indonesia. First, a BDA simulation was carried out to reveal its usefulness in predicting and evaluating patient costs, and finally improving the cost recovery rate (CRR) of each DRG case. This part formulated and tested the mathematical models that predict patient cost, the CRR and determinants (length of stay/LOS, severity/SEV, patient age/AGE and gender/SEX). For this purpose, data of the top ten inpatient cases of 2018 were collected and analysed. Second, semi-structured interviews with senior staff and doctors were carried out to understand cost control strategies implemented in the hospital and the management and doctors’ perceptions regarding the application of tested mathematical models for cost control. Old institutional economics and new institutional sociology were used to gain insight about how and why management accounting practices changed in the hospital.

The findings show that the absence of detailed per-case/patient cost information has not only hindered further evolvement of MACs but also stimulate tensions between managerial and medical worlds in the studied Indonesian public hospital. The simulation of BDA in this study was not only discovering the determinants of case cost recovery but also enabling the prediction of CRR of patients immediately after admission. The application of BDA and casemix accounting in the hospital will potentially become catalysts of discussion and mutual learning between managerial and medical staff in controlling patient costs.

This paper provides a more comprehensive picture of the potential roles of BDA in cost control practices. The study assesses the feasibility of BDA application in the hospital and evaluates the potential roles and acceptance of BDA application by both management and doctors.

Provides a review and analysis of the ambulatory patient groups classification system. Discusses a review of the history, development and implementation process. Concludes that in the ongoing efforts to move towards full‐managed care in the not‐so‐distant future, ambulatory patients groups are another potential cost‐cutting remedy for current health care providers and that future research into this issue is a must for public policy makers.

This chapter assessed internal and external environmental factors that affect variations in rural hospital profitability with a focus on the impact of the Patient Protection and Affordable Care Act regulations that resulted in the expansion of Medicaid eligibility, as well as four Medicare programs that target rural hospitals. A cross section of 2,114 rural US hospitals operating during 2015 was used. The primary source of data was Medicare Hospital Cost Reports. Ordinary least squares regression with correction for serial correlation, using total margin and operating margin as dependent variables, was employed to ascertain the association between profitability and its correlates.

The mean values for operating margin and total margin were −0.0652 and 0.0259, respectively. Hospital profitability was positively associated with location in a Medicaid expansion state, classification by Medicare as a Critical Access Hospital or Rural Referral Center (total margin only), hospital size, system membership, and occupancy rate. Profitability was negatively associated with average length of stay, government ownership, Medicare and Medicaid share of admissions, teaching status, and unemployment rate.

This chapter found that the Medicaid expansions provided modest help for the financial condition of rural hospitals. However, the estimates for the four targeted Medicare Programs (i.e., Critical Access Hospital, Medicare Dependent, Sole Community Critical Access Hospital, and Rural Referral Center) were either small or not significant (p > 0.10). Therefore, these specially targeted federal programs may have failed to achieve their goals of preserving the financial viability of rural hospitals. This chapter concludes with implications for practice.