PROVIDER STRATEGIC RESPONSES TO A BLENDED HOSPITAL PAYMENT REFORM IN CHINA: EVIDENCE ON PATIENT SELECTION, SERVICE ADJUSTMENT, AND PRICE MANIPULATION...
Author(s)
Xinyue Dong, Ph.D1, Jing Wu, PhD2.
1School of Medicine and Health Management, Tongji Medical College of Huazhong University of Science and Technology, Wuhan, China, 2School of Pharmaceutical Science and Technology, Faculty of Medicine, Tianjin University, Tianjin, China.
1School of Medicine and Health Management, Tongji Medical College of Huazhong University of Science and Technology, Wuhan, China, 2School of Pharmaceutical Science and Technology, Faculty of Medicine, Tianjin University, Tianjin, China.
OBJECTIVES: China’s Healthcare Security-Diagnosis Related Group (CHS-DRG) system, the country’s first nationwide DRG-based payment reform, was piloted in city A on November 1, 2021. The reform combines DRG-based payments with a global budget and ex post price adjustments, generating mixed provider incentives. The study aims to evaluate provider strategic behaviors elicited by the CHS-DRG program, focusing on patient selection, service adjustment, and price manipulation.
METHODS: A controlled, population-based natural experiment was employed using claims data from November 2020 to September 2022, including 932,354 inpatient cases from pilot hospitals (intervention) and 608,940 matched cases from non-pilot hospitals (control). Guided by McGuire’s Physician Utility Theory, difference-in-differences and logistic regression models were applied to identify the existence, typologies and consequences of unintended care. Marginal admission was measured through Charlson Comorbidity Index (CCI) and annual hospitalizations. Cost-shifting was assessed by outpatient spending and visits near admissions. Upcoding was examined via complication coding proportions. All models adjusted for patient demographics, socioeconomic status, clinical conditions and hospital characteristics.
RESULTS: Post-reform, healthier patients were increasingly admitted, with lower per-admission CCI scores (-3.34%, P<0.001) and increased annual hospitalizations (4.73%, P<0.001). High-risk patients were redirected to alternative payment schemes, but critically ill patients were not refused. Cost-shifting occurred, evidenced by higher outpatient spending (4.45%, P<0.001) and visits within three days before admission or after discharge (9.32%, P<0.001). Meanwhile, operative procedures rose by 5.99% (P<0.001). Complication coding increased (OR=1.49, P<0.001), particularly among high-weight DRGs, indicating upcoding through inflating diagnosis severity. No excessive diagnoses were observed. These behaviors may have compromised care quality and distorted cost-containment effects.
CONCLUSIONS: Timely updates to DRG classification and benchmarks, refinement of risk-adjustment and exemption rules, and implementation of intelligent oversight and supportive policies are essential to mitigate opportunistic behaviors and sustain reform objectives, offering critical lessons for China and other countries pursuing similar payment systems.
METHODS: A controlled, population-based natural experiment was employed using claims data from November 2020 to September 2022, including 932,354 inpatient cases from pilot hospitals (intervention) and 608,940 matched cases from non-pilot hospitals (control). Guided by McGuire’s Physician Utility Theory, difference-in-differences and logistic regression models were applied to identify the existence, typologies and consequences of unintended care. Marginal admission was measured through Charlson Comorbidity Index (CCI) and annual hospitalizations. Cost-shifting was assessed by outpatient spending and visits near admissions. Upcoding was examined via complication coding proportions. All models adjusted for patient demographics, socioeconomic status, clinical conditions and hospital characteristics.
RESULTS: Post-reform, healthier patients were increasingly admitted, with lower per-admission CCI scores (-3.34%, P<0.001) and increased annual hospitalizations (4.73%, P<0.001). High-risk patients were redirected to alternative payment schemes, but critically ill patients were not refused. Cost-shifting occurred, evidenced by higher outpatient spending (4.45%, P<0.001) and visits within three days before admission or after discharge (9.32%, P<0.001). Meanwhile, operative procedures rose by 5.99% (P<0.001). Complication coding increased (OR=1.49, P<0.001), particularly among high-weight DRGs, indicating upcoding through inflating diagnosis severity. No excessive diagnoses were observed. These behaviors may have compromised care quality and distorted cost-containment effects.
CONCLUSIONS: Timely updates to DRG classification and benchmarks, refinement of risk-adjustment and exemption rules, and implementation of intelligent oversight and supportive policies are essential to mitigate opportunistic behaviors and sustain reform objectives, offering critical lessons for China and other countries pursuing similar payment systems.
Conference/Value in Health Info
2026-09, ISPOR Asia Pacific 2026, Bangkok, Thailand
Value in Health, Volume 55, Issue S1
Code
HPR55
Topic
Health Policy & Regulatory
Topic Subcategory
Insurance Systems & National Health Care
Disease
No Additional Disease & Conditions/Specialized Treatment Areas