In surgical care, activity-based payment shifted patients away from for-profit hospitals to nonprofit hospitals without raising total activity

Activity-based payment has been gradually introduced from 2004 to 2008 in nonprofit hospitals; it already prevailed in for-profit hospitals at the time. Though activity increased in the nonprofit hospitals (directly concerned by the reform), it is unclear whether this increase is due to sector-level positive shocks or if it stems from patients switching from for-profit to nonprofit hospitals.

This study focuses on surgical care between 2005 and 2008, i.e., the relevant period to consider in order to evaluate the reform. It simulates the counterfactual situation that would have prevailed in 2005, should all financial incentives induced by activity-based payment have already been there, and compares it with the observed situation in order to infer the causal impact of the reform. Simulating the counterfactual requires in particular to neutralize observed (or unobserved) demand- or supply-specific changes in that industry.

In surgical care, the introduction of activity-based payment would have mainly shifted patients away from for-profit hospitals to nonprofit hospitals, without raising total activity. It would have benefitted to the patients by enhancing nonprofit hospitals' attractivity. However, it would have been detrimental to hospitals that would have incurred pecuniary or non-pecuniary costs.