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 results show that the pandemic’s broad social and economic impact has adversely affected population health well beyond those directly suffering from COVID-19. Study participants with chronic conditions faced significant challenges in managing their symptoms during the pandemic. They experienced a loss of income and difficulties in accessing healthcare or medications, with the resulting delayed and foregone care leading to uncertain longer-term effects. For a nontrivial portion of participants, these factors are associated with the worsening of diabetes symptoms. The threat is twofold among people living in rural populations with limited access, availability, and affordability of healthcare services.

A Global Health Priority

The unintended adverse consequences of the COVID-19 pandemic on chronic disease care may also further aggravate inequality in health outcomes. “If the trend continues and no immediate actions are taken to mitigate pandemic impacts,” Eggleston and her colleagues caution, then “the Asia-Pacific region will struggle to achieve the 2030 Sustainable Development Goal (SDG) target 3.4 to reduce premature mortality from non-communicable diseases by a third relative to 2015 levels and to promote mental health and wellbeing.”

Addressing the pandemic’s unintended negative social and economic impacts on chronic disease care is a global health priority, determine the researchers. They propose several measures to help provide timely care for people with chronic conditions in resource-constrained settings. These include implementing innovations in healthcare delivery models to improve the adoption of healthy lifestyle changes and self-management of chronic disease and mild COVID-19 symptoms, increasing investment in interventions to provide social and economic support to disadvantaged populations, and strengthening primary healthcare infrastructure and support of healthcare providers.

The study was supported in part by funding from Shorenstein APARC’s faculty research award, Stanford King Center for Global Development, and a seed grant from the Stanford Center for Asian Health Research and Education.

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Challenges for Primary Health Care Services

China, a large and rapidly developing middle-income country with a hospital-based service delivery system for its aging population, makes a suitable case study of efforts to promote PHC management. Over the past several decades, PHC use in China has significantly decreased relative to hospital-based care. This trend is a natural consequence of the country’s unprecedented increases in living standards and improvements in financial risk protection, which increase patients’ demand for quality care and spur self-referral to providers with higher-perceived quality like hospital outpatient departments.

The performance differences between PHC and hospital-based care are especially stark in China’s rural areas, where management of chronic diseases relies heavily on grassroots physicians, who have limited medical education and training. That is why Eggleston and her colleagues set out to provide new empirical evidence about the effectiveness of a program that promotes PHC management of hypertension and diabetes for rural Chinese. Part of the National Basic Public Health Service Program for rural Chinese, it financially rewards PHC grassroots physicians for managing residents with chronic diseases.

Collaborative Research in the Era of Great Power Competition

Eggleston’s co-authors include her colleagues at the Zhejiang Provincial Center for Disease Control and Prevention (Zhejiang CDC). Their study is the culmination of Eggleston’s multiyear collaborative research project with the Zhejiang CDC team, "Addressing Health Disparities in China," which looks to Tongxiang county in Zhejiang as a case study of China's responses to healthcare inequalities and population aging challenges in rural and urban areas. The project also involved two Stanford doctoral students who worked with Eggleston.

“This kind of collaboration, where we utilize the data that's available to answer an important question while respecting the privacy of the individuals and hopefully delivering benefits to them through more effective or affordable programs in the future perhaps is a promising model for researchers here and elsewhere to undertake,” she notes.

Disentangling the Effect of Primary Health Care Management

To study the program’s effectiveness, the researchers assembled a unique dataset linking individual-level administrative and health information between 2011 and 2015 for rural Chinese diagnosed with hypertension or diabetes in Tongxiang, a mostly rural county of Zhejiang province in southeast China. Collected by the Tongxiang CDC and Zhejiang CDC, the compiled database links basic demographic information, health insurance claims, PHC service logs, and health check-up records — four sets of data that are rarely linked and analyzed in combination in China healthcare research.

Targeting the program’s effects on healthcare utilization, spending, and health outcomes, Eggleston and her colleagues compare residents in neighboring villages that straddle township boundaries. These residents are similar in their individual and environmental characteristics that shape health care use but are subject to different PHC management practices. This “border sampling” allows the researchers to disentangle the effects of PHC management from other underlying spatial differences that impact health care utilization. For each township, the researchers use a management intensity index that reflects the cumulative efforts of PHC physicians to screen their communities and keep patients within the PHC management programs for controlling hypertension and diabetes. Each township’s experience with PHC management over the 5-year study period is thus a case study for rural China.

Net Value in Chronic Disease Management

The results are encouraging for China's investment in primary care management of chronic diseases. Eggleston and her colleagues find that patients residing in a village within a township with more intensive PHC management had a relative increase in PHC visits, fewer specialist visits, fewer hospital admissions, and lower spending compared to neighbors with less intensive management. They also tend to have better medication adherence and better health outcomes as measured by blood pressure control.

The results suggest that PHC chronic disease management in rural China improves net value in multiple ways — increasing PHC utilization, reducing avoidable hospitalizations, decreasing medical spending, and improving intermediate- and long-run health outcomes — all while leveraging existing resources rather than restricting care.

The findings also help inform investments in primary health care in LMICs. They highlight the latent potential of frontline healthcare workers in such settings to be more productive and show that financially rewarding these grassroots workers for managing residents with chronic diseases helps improve health outcomes. Moreover, they offer empirical evidence that supports the effectiveness of chronic disease management programs as part of broader regional initiatives to address population health.

India is facing a mounting burden of noncommunicable diseases (NCDs) such as diabetes, cancers, and cardiovascular diseases. NCDs affect more than 20 percent of the Indian population and their prevalence is projected to expand substantially as the population aged 60 and over increases. Left unchecked, the costs of managing chronically ill and aging sectors of the population grow exponentially.

To control costs and address the growing chronic disease burden, India’s public programs must integrate curative hospital services with the most cost-effective preventive and primary interventions, argue Karen Eggleston, APARC’s deputy director and the director of the Asia Health Policy Program (AHPP), and Radhika Jain, a postdoctoral research fellow with AHPP. India must also urgently expand and improve the evidence base on economic evaluations of both preventive and curative health interventions in the country.

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In a correspondence piece published by BMC Medicine, Eggleston and Jain examine the features and limitations of a study that takes an important first step in that direction: a cost-effectiveness study of the Kerala Diabetes Prevention program (K-DPP) that adds such evidence on how to prevent diabetes cost-effectively in India and other low- and middle-income countries.

The study’s authors present a cost-effectiveness analysis of 1007 participants in the K-DPP, and their estimates indicate that K-DPP was cost-effective. Indeed, Eggleston and Jain determine that the analysis shows potential cost-effectiveness in “nudging” the participants towards a healthier lifestyle through suggestive reductions in tobacco and alcohol use and waist circumference. The results of the cost-effectiveness analysis of the K-DPP “highlight the importance of continued research on community-based promotion of healthy lifestyles,” say Eggleston and Jain.

Evidence-based approaches to chronic noncommunicable disease intervention are essential for providing cost-effective care and creating models for future programs like the K-DPP. Eggleston and Jain conclude that future studies advancing evidence-based approaches to chronic noncommunicable disease intervention — ones that cover larger and more representative populations over longer time periods — remain important for more generalizable assessments to inform policy decisions.

Jointly with partners throughout Asia, the Asia Health Policy Program (AHPP) at Shorenstein APARC has developed comparative research on health care use, medical spending, and clinical outcomes for patients with diabetes in the region and other parts of the world as a lens for understanding the economics of chronic disease management. Karen Eggleston, AHPP director and APARC deputy director, recently traveled to South Korea, where she led three project-related events.

On November 29, a workshop on Net Value Diabetes Management was held at Seoul National University (SNU) School of Medicine. This was the third such workshop convened through the project, following two previous ones held in Beijing at the Stanford Center at Peking University. Another workshop, on diabetes modeling, hosted by the Mt. Hood Diabetes Challenge Network, was held at Chung Ang University on December 1. Finally, on December 5, Eggleston held an information session, titled Comparative Economics Research on Diabetes, during the 2019 International Diabetes Federation (IDF) at BEXCO in Busan. These events were also made available through video conferencing to enable remote participation by collaborators who were unable to travel to Korea.

[Learn more about AHPP’s Net Value in Diabetes Management research project]

Diabetes Net Value Workshop

The workshop brought together team members from multiple health systems — including South Korea, Japan, Taiwan, Hong Kong, Thailand, India, the Netherlands, and the United States — to discuss comparative research on the economics of diabetes control. Eggleston shared the results of a study outlined in a working paper on the net value of diabetes management in Japan, the Netherlands, Taiwan, and Hong Kong. This research is part of a broader series of studies aimed to help address the policy challenge of finding the best strategies to improve health through cost effective prevention and healthcare productivity in chronic disease management.

The key to this research was to measure changes in quality or health outcomes over time by predicting mortality risk using blood pressure, blood sugar, and other factors amenable to patient and provider control and improvement (controlling for age and duration of diabetes diagnosis). The research seeks to understand how we can control cost and eliminate waste without cutting out the things that are valuable and improving people’s quality of life. Further studies probe determinants of relative net value of a pay-for-performance program in Taiwan, adherence to medications and vertical integration in Japan, and net value based on a randomized controlled trial in India.

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Young Kyung Do of SNU reported that according to his evaluation project for diabetes care, the quality of care and treatment in South Korea has improved and is similar to Hong Kong and Singapore. The goal of the program is to provide more comprehensive care to diabetes patients.

Talitha Feestra of the Netherlands net value team presented her proposal for joint research to develop new prediction models for specific populations as a core component of health economics decision models in Diabetes. Feestra will take the lead to develop the plan and time frame for the continuation of this research in 2020.

Several additional comparative studies were proposed and discussed. Participants who attended the workshop and contributed to discussion included Junfeng Wang from the Netherlands net value team; Jianchao Quan and Carmen Ng from Hong Kong University; Daejung Kim from the Korea Institute for Health and Social Affairs (KIHASA); Taehoon Lee, Eun Sil Yoon, and Hongsoo Kim from SNU; Piya Hanvoravongchai from Chulalongkorn University; and Gregory Ang from National University of Singapore. Remote participants included Vismanathan Baskar from Madras Diabetes Research Foundation; Wasin Laohavinij from Chulalongkorn University (visiting Stanford University autumn quarter); and Rachel Lu from Chang Gung University.

Mt. Hood Diabetes Challenge Workshop on Diabetes Modeling

Philip Clarke from the Health Economics Research Center, University of Oxford, presented the history of insulin as a cure for diabetes and discussed in detail methods for economic modeling of diabetes, including quality of life and diabetes cost, drawing from his rich experience developing the UK Prospective Diabetes Study outcomes model. The second presenter was Andrew Palmer of University of Tasmania, Australia. His presentation included many additional economic modeling pointers, especially regarding drawing in the literature for building models.

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We are grateful to Professors Clarke and Palmer for graciously allowing the AHPP network researchers to join the workshop both in person and remotely, adding to their chronic disease modeling skills, and for inviting Karen Eggleston to present a keynote at the Mt Hood conference that took place before the modeling workshop.

Information Session: Comparative Economics Research on Diabetes

The third and final component of the diabetes research events was held on December 5 as part of the International Diabetes Federation congress in Busan, Korea, and presented the network to clinicians and public health researchers. Participants from China, India, and Australia attended. They shared updates on their individual projects and discussed methods and ideas for future collaboration.