Designing Payment Contracts for Healthcare Services to Induce Information Sharing: The Adoption and the Value of Health Information Exchanges (HIEs)
Authors: Ayvaci, Mehmet U. S.; Cavusoglu, Huseyin; Kim, Yeongin; Raghunathan, Srinivasan
Journal: MIS Quarterly (2021)
<jats:p>Recent initiatives to improve healthcare quality and reduce costs have centered around payment mechanisms and IT-enabled health information exchanges (HIEs). Such initiatives profoundly influence both providers’ choices in terms of healthcare effort levels and HIE adoption and patients’ choice of providers. Using a game-theoretical model of a healthcare setup, we examine the role of payment models in aligning providers’ and patients’ incentives for realizing socially optimal (i.e., first-best) choices. We show that the traditional fee-for-service (FFS) payment model does not necessarily induce the first-best solution. The pay-for-performance (P4P) model may induce the first-best solution under some conditions if provider switching by patients during a health episode is socially suboptimal, making provider coordination less of an issue. We identify an episode-based payment (EBP) model that can always induce the first-best solution. The proposed EBP model reduces to the P4P model if the P4P model induces the first-best solution. In other cases, the first-best inducing EBP model is multilateral in the sense that the payment to a provider depends not only on the provider’s own…