277. Beyond Fee-for-Service: How Comprehensive Contracts Can Transform Primary Care
Contributed abstract in session FC-5: Healthcare Management /3, stream Regular talks.
Friday, 14:00-15:30Room: Room S6
Authors (first author is the speaker)
| 1. | E. Lerzan Ormeci
|
| Industrial Engineering, Koc University | |
| 2. | A. Mete Ozbek
|
| Industrial Engineering, Koç University | |
| 3. | Hessam Bavafa
|
| Wisconsin School of Business, University of Wisconsin-Madison | |
| 4. | Evrim Didem Gunes
|
| Operations and Information Systems, Koc University |
Abstract
We study comprehensive contracts (CCs), which are performance-based reimbursement schemes for managing patients with chronic conditions. These contracts aim to transform primary care beyond the traditional fee-for-service model by inducing providers to offer various services, including preventive care, chronic disease management, and care coordination. We develop a stylized Principal-Agent model to study primary care practice (PCP) capacity allocation under a comprehensive contract. The contract is motivated by performance-based contracting systems for primary care. We first show that a pure fee-for-service contract fails to induce PCPs to allocate capacity for comprehensive care. We then analyze a comprehensive contract offering a capitation payment, a performance bonus, or a combination and show that such a contract is necessary but insufficient to induce a comprehensive care effort. We identify PCP effectiveness in delivering comprehensive care as crucial in designing comprehensive contracts. We show that offering CCs to highly effective PCPs enhances access to healthcare and improves outcomes. Characterization of the optimal CCs shows that they fail to achieve the first-best outcomes, even under the risk-neutrality of the PCP. Our numerical analysis suggests that a comprehensive contract with a strict budget limitation could fail to attract the majority of PCPs, and the payer should consider improving the revenue potential of PCPs for meaningful participation.
Keywords
- Healthcare management
Status: accepted
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