This paper outlines the results of a prospective provider-payment reform experiment in two counties in China's Shandong province. The experiment estimates – at the level of the township health center (THC) – the relative effects on the cost and quality of care in relation to the shift from prescribing drugs on a fee-for-service (FFS) to two alternatives: a capitated global budget (CGB) and a combination of CGB and pay-for-performance (P4P). Among other findings, the study revealed that P4P reduced inappropriate prescribing significantly in the county where the initial level was above the penalty threshold; no effects were seen in either the county where initial levels were around or below the threshold or on out-of-pocket spending in either county. The experiment sheds light on the ability of supply-side reforms like a shift to P4P to nudge a health system toward the broad goal of UHC: ensuring everyone gets care that is both appropriate to their needs and affordable.
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Author/s: Xiaojie Sun, Xiaoyun Liu, Qiang Sun, Winnie Yip, Adam Wagstaff, Qingyue Meng
Publication ID: WPS6892
Date of Publication: May 2014