12 Flat-rate reimbursement helps avoid overtreatment and reduce healthcare costs

Fee-for services reimbursement incentivizes physicians to diagnose and treat more – and more expensively – than necessary. The study investigated how changes in the way doctors are reimbursed affect the supply of medical services in the out-patient setting and health care costs.

  • Project description (completed  research project)

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    The study examined the impact of reimbursement schemes on medical out-patient services in three steps.

    First, the study analysed the impact of the reform of the reimbursement schemes in Switzerland. The purpose of reforming the Swiss out-patient reimbursement scheme was to change financial incentives for switching provision of care from specialists to primary care physicians. For this purpose, it introduced a consultation bonus for general practitioners and paediatricians. At the same time, it decreased the fees for several technical services typically conducted by specialists (e.g. imaging services). This project used medical routine data to compare the services provided before and after the reform of the reimbursement scheme.

    Second, the study examined the impact of different reimbursement schemes in Baden-Württemberg. Paediatricians in Baden-Württemberg can choose between two different reimbursement schemes. They differ with regard to the services for which a flat rate is paid. Medical routine data was used to examine how the alternative schemes affect the provision of services.

    Third, the results obtained for Switzerland and Baden-Württemberg were compared.

  • Background

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    Traditionally, physicians are reimbursed fee-for-services. This can lead to the provision of more – and more expensive – medical services than necessary. By comparison, alternative reimbursement schemes, involving flat rates per patient or for complex treatments, provide a financial incentive to avoid overtreatment. Against this background, the reimbursement schemes for primary care physicians and paediatricians were reformed in Switzerland and Germany.

  • Aim

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    The aim of the study was to investigate how recent reforms of the out-patient reimbursement schemes in Switzerland and Baden-Württemberg were the supply of medical services and health care costs.

  • Results

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    The results show that after the introduction of the consultation bonus in Switzerland the number of consultations per patient increased and the duration per consultation decreased. Furthermore, it could be observed that after lowering the fees for technical services, the supply was reduced.

    The study on the behavior of pediatricians in Baden-Württemberg showed that patients can benefit when services are reimbursed on a flat-rate basis. Paediatricians participating in selective contracting diagnosed patients for amblyopia significantly more often compared to non-participating paediatricians. The effect might be driven by the demand side, as the patients’ parents no longer had to pay for the amblyopia screening.

  • Relevance / Application

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    The results of this study provide evidence for Switzerland and Germany that physicians respond to financial incentives in the remuneration of their services. The results can be used to design future reimbursement schemes accordingly, thus contributing to avoid overtreatment and curb rising healthcare costs more effectively.

  • Original title

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    Smarter Physician Reimbursement: Evidence from recent German and Swiss Reforms