The Impact of Bundled Payment on Hospital Operations

This paper studies the impact of bundled payment policy on healthcare cost, efficiency, quality, and shift of care. Using insurance claim data, we empirically offer a more nuanced understanding of the impact of bundled payment policy on hospital operations and provide new evidence from China. Our evidence suggests that transitioning from fee-for-service to bundled payment reimbursement resulted in declines in treatment costs and length of stay. Along with that decline, there was an increase in planned revisits to outpatient clinics, which indicates a shift of care from the inpatient to the outpatient setting, as well as a rise in unplanned revisits, indicating a decline in service quality. The increase in readmission rate to inpatient wards is very small and not statistically significant. In addition, we discuss the design and implementation of bundled payment. Our results imply that careful bundle design is vital to encouraging providers to implement the new program without sacrificing quality. Funding: This research is supported by the National Natural Science Foundation of China [Grants 72091215/72091210, 71921001], the Research Grants Council of the Hong Kong Special Administrative Region, China [Grant HKU 17500217], and the Fundamental Research Funds for the Central Universities [Grant 2040000018].