As healthcare costs for patients with non-communicable diseases such as diabetes have risen, governments and healthcare providers have sought creative measures to align financial incentives with better patient outcomes. One incentive payment system known as “pay-for-performance” (P4P), in which providers are beholden to metric-driven outcomes, represents a potential path forward for healthcare providers to improve healthcare processes, resulting in higher quality and better patient health outcomes. The evidence on the effectiveness of P4P programs, however, is mixed.

To address this uncertainty, a new study, published in The European Journal of Healthcare Economics, assesses the effectiveness, in monetary terms, of a P4P program for patients with diabetes at a hospital system in Taiwan. 

The study coauthors, including APARC’s Asia Health Policy Program Director and FSI Senior Fellow Karen Eggleston, employed new patient-level data on clinical indicators, utilization, and expenditures, combined with data from the national death registry, to better understand the costs and benefits of the P4P program. Their results show that Taiwan’s implementation of the P4P program for diabetic care yielded positive results in terms of net value, defined as the value of life years gained minus the cost of care.

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Assessing Net Value of Taiwan’s P4P

Taiwan’s Bureau of National Health Insurance (now National Health Insurance Administration) introduced P4P in 2001 and enhanced the program in 2006 with an incentive for pay-for-reporting of outcomes. Financial incentives were used to encourage continuity of care with metrics such as new patient enrollment, follow-up visits, and annual reports, each tied to a specific monetary value. The program’s features are common across P4P, so the study’s findings have implications in other settings that incorporate similar designs in their P4P programs.

The study compares two different groups of patients at a large regional hospital in Taiwan, one consisting of newly enrolled P4P patients and another using P4P patients who have been enrolled since the beginning of the program. The researchers leverage detailed clinical data not used in previous assessments of the P4P program to better identify both costs and longer-term clinical outcomes based on measured biomarkers and predicted mortality.

Using an economic cost-benefit analysis conducted from a budgetary perspective, the study is the first analysis of any P4P program that estimates changes in the quality-adjusted price index relative to usual care. The authors consider health benefits in terms of survival and predicted survival and convert them into monetary terms. This net value approach is especially useful for policymakers and healthcare administrators who implement value-based purchasing and monitor outcomes for any service delivery innovation over time.

The study finds that Taiwan’s P4P program provided a positive net value for payers and patients, ranging from $40,084 USD to $348,717 USD. These positive net value results are primarily derived from health outcomes as measured by lower mortality rates in the P4P versus non-P4P cohorts, across both newly enrolled and continuously enrolled groups of patients. According to the authors, “these encouraging findings of the positive value of quality improvement net of expenditures adds evidence to the literature that has found mixed results of P4P programs.” 

 This study develops a new model for assessing the net value of service delivery innovations like P4P programs that can be applied in other contexts globally, providing healthcare systems researchers with new tools to better understand an emergent option for incentivized care. With a more economically-translatable understanding of P4P programs, this research helps build the bridge between the oft-disparate worlds of healthcare and policy.

The Walter H. Shorenstein Asia-Pacific Research Center (APARC) is pleased to invite applications for a suite of fellowships in contemporary Asia studies to begin fall quarter 2023.

The Center offers postdoctoral fellowships that promote multidisciplinary research on contemporary Japan and contemporary Asia broadly defined, inaugural postdoctoral fellowships and visiting scholar positions as part of the newly launched Stanford Next Asia Policy Lab, and a fellowship for experts on Southeast Asia. Learn more about each opportunity and its eligibility and specific application requirements:

Postdoctoral Fellowship on Contemporary Japan

Hosted by the Japan Program at APARC, the fellowship supports research on contemporary Japan in a broad range of disciplines including political science, economics, sociology, law, policy studies, and international relations. Appointments are for one year beginning in fall quarter 2023. The application deadline is December 1, 2022.
 

As populations age, societies must take into account the nuanced needs of different groups. This is the research domain of Cynthia Chen, who joined the Walter H. Shorenstein Asia-Pacific Research Center as visiting scholar with the Asia Health Policy Program during the 2022 winter and spring quarters. An Assistant Professor at the National University of Singapore (NUS), Chen’s current research focuses on the well-being of older adults, healthcare financing, and the economics of aging. 

Drawing on support from Singapore’s Ministry of Health, Ministry of Education, the U.S. National Institutes of Aging, and the Thai Health Promotion Foundation among others, Chen explores how demographic, economic and social changes affect the burden of care, financing needs, and optimal resource allocation in the future. 

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In a recent talk at APARC, Chen presented findings on gender and socioeconomic differences in aging, exploring the ways in which such society-level characteristics can have major positive and negative effects on the health and well-being of older persons. 

According to Chen, these effects are interconnected with factors including access to effective health care, support systems that enhance function and restrict dependency, and programs assuring financial security and opportunities for older persons to effectively engage in society. “We must move beyond the archaic old-age dependency ratios and metrics, such as GDP, which neglect many of the critical factors that influence societal function,” Chen argued.

Finding Better Metrics for Aging

Gender and socioeconomic differences affect a country's ability to support its older adult population. Specifically, the longevity risk associated with females' longer life expectancy entails different needs between genders in old age. Chen aims to quantify gender differences in the aging experience of Organization for Economic Co-operation and Development (OECD) countries and compare differences in projections of disability and chronic diseases among future cohorts of older adults, including disparities by educational attainment.

In order to gain a more nuanced perspective on aging data, Chen drew data from The Aging Society Index, composed of established and available social and economic measures. The Index provides a quantitative estimate of the degree to which a society is successfully adapting to demographic transformation.

Much of Chen’s time is spent focusing on how to address gender-specific needs when developing policies and programs for aging societies. Chen cites The Network on an Aging Society, which defines a successfully aging society as “one which provides for the general well-being of older adults, is cohesive with minimal tension between generations and major subgroups, productive with opportunities for engagement both within and outside the workforce, and is equitable and secure.” Such society-level characteristics are necessary to understand the difference between successful and unsuccessful policies. 

Chen identifies systemic gender differences across critical domains of successful social aging that favor males. Thus, Chen argues, for many wealth or income-based measures, such as security, equity and productivity, males experience an advantage, which suggests room for improving women’s standing in paid work, job opportunities, and retirement income. One aspect where women do have an advantage is life expectancy. However, they tend to live longer in poorer health, reflected in a lower well-being score. 

Likewise, the gender disparity in cohesion is significantly driven by differences in co-residence rates, which is attributable to women outliving their spouses. These findings suggest that gender-specific needs should be considered when engineering policies and programs for aging societies. 

Varying Rates of Functional Disabilities 

Gender is not the only society-level characteristic that Chen investigates in her resarch on aging. In a recent study, published in Asian Development Review, Chen and her co-authors, including AHPP Director and FSI Senior Fellow Karen Eggleston, shed light on the dynamic evolution of the health and functional disparities of the future elderly.

In order to understand the differences in aging and its relationship with functional disabilities across multiple societies, Chen looked at data from Korea and Singapore. While the two nations have a similar pace of aging, they differ in the rate of increase in functional disability and chronic diseases. This may be due to many factors, including diet, lifestyle, and cultural differences, Chen suggests. Most notably, older adults with high educational attainment are projected to have a lower prevalence of functional disability and chronic diseases, and consistent across gender in both Korea and Singapore. 

The study employs a new model to compare projections of functional status and disability among future cohorts of older adults, including disparities in disability prevalence by educational attainment. These changes will have important implications for social protection systems, including the financing and delivery of long-term care and health care. The study highlights potential differences in the aging experience by gender and education in each country to inform social and healthcare policy and provides a common platform for international comparison to identify and compare challenges across countries.

Studying aging and effective medical care in late adulthood, especially with an eye for society-level characteristics, is an urgent task. Chen’s research complements the existing literature on life-protection activities, further underscoring the importance of investment in healthy aging and control of chronic disease so that the future elderly may receive appropriate care.