We designed the global budget in a way that incentivized county hospitals to build their capacities and play a gate-keeping role to not refer patients to out-of-county hospitals for health conditions that they can treat. Specifically, the budget was calculated as follows.
If county hospitals referred patients to out-of-county hospitals for health conditions that they are capable of treating, expenditure incurred at these higher-level hospitals would be paid from the county hospital’s budget. To align incentives on the demand side, the NCMS reimbursement rates for municipal hospitals were adjusted to be lower than that for county hospitals. Reimbursement rates at these higher-level hospitals without referrals were also reduced to only half of that with referrals.
Quality performance indicators consisted primarily of process of care measures. They fall into two sets: non-disease specific measures and disease-specific measures. Table 1 gives the list of non-disease specific measures and their sources and formulas.
For disease-specific measures, after an examination of the inpatient data, the following diseases were identified as focal areas: pneumonia, chronic obstructive pulmonary disease (COPD), ischemic cerebral infarction, and acute myocardial infarction (AMI). Using the US Hospital Quality Alliance framework (HQA) and UK Advancing Quality framework as references, a subset of indicators were selected as disease-specific measures.
Each hospital received a score based on their quality improvements from the previous year.