Healthcare provider response to payment system reform: evidence from New Zealand

How healthcare providers in New Zealand responded to the payment system reform that reintroduced the capitation scheme, which pays providers a fixed amount per enrolee, regardless of the actual usage of healthcare services. Using over 10 million observations, which comprise every publicly funded hospital discharge over 1999–2011, it is found that capitation decreased the transfer of patients between districts, especially those whose conditions are severe. Overall, the decline in inter-district transfer seems to have negative effects on patient outcomes, as readmission to healthcare facilities increased, whilst length of hospital stay decreased. However, outcomes for transferred patients improved, implying that the decrease in inter-district transfer may be detrimental to the health sector.