Do hospitals react to financial incentives? The impact of Payment by Results on emergency cardiac treatment in English hospitals

Abstract: There is not much evidence on the impact of payment schemes on treatment decisions in English hospitals.  The prospective payment scheme ‘Payment by Results’ (PbR) was first implemented in 2003/04 for a selected number of procedures and hospitals, and was then gradually expanded over the following years.  In the years 2004/05 and 2005/06, early Foundation Trusts (FTs) were reimbursed via PbR for particular non elective cardiac procedures, whereas other trusts were still reimbursed via existing mechanisms such as block contracts.

We use the staged rollout of PbR as a natural policy experiment to investigate the impact of different payment schemes on treatment of emergency cardiac patients.  We use a difference-in-difference approach to compare the number of Percutaneous Coronary Interventions (PCIs), Coronary Artery Bypass Grafts (CABGs), and cardiac patients treated medically, across early FTs and non-FTs before, during and after the years while the two different payment schemes were in place.  We use ‘Hospital Episode Statistics’ for the years from 2003/04 to 2007/8, and supplement these with other data sources to control for various trust level factors that may also impact on treatment decisions.

Initial results show that early FTs performed less PCIs than non-FTs in the two years while payment schemes differed, but there were no differences in CABGs and medically treated patients.  However, there are no significant differences if early FTs are only compared against non-FTs which acquired FT status in the year after, possibly because those trusts are more similar to early FTs than other trusts.  We conclude that there is some evidence that financial incentives may have influenced hospitals’ treatment decisions, possibly because they were worried about the financial consequences of PbR, but these results may be due to unobserved differences between early FTs and non-FTs, and other major policy initiatives effecting hospitals at this time.