Yunan Ji

Working Papers

Can Competitive Bidding Work in Health Care? Evidence from Medicare Durable Medical Equipment. (January 2023) Reject & Resubmit, American Economic Review


2022 American Society of Health Economists Student Paper Award 

2023 EARIE Young Economists' Essay Award

Media Coverage: The Washington Post

Prices are a significant driver of high health care spending in the US, but how to reduce prices remains an open question. I examine one widely-touted solution – setting prices via competitive bidding – in the context of a Medicare payment reform. The reform gradually replaced administratively-set prices with prices from competitive bidding for durable medical equipment (DME) in 100 metropolitan statistical areas. Using detailed claim-level data, I estimate that the competitive bidding program reduced the prices of covered items by 45%. However, the program also generated an 11% reduction in quantity, which several pieces of evidence suggest is associated with inefficient supply shortages. One likely cause of the shortage is the auction design, which allows winning bidders to renege on supply commitment. Leveraging novel bid data, I estimate an equilibrium model of optimal bidding and find that the program generated prices that were on average 7% below the market clearing price, consistent with the observed supply shortages. I use the results to show that counterfactual auction designs could reach the desired market quantity while saving 42% in government spending relative to administratively-set prices. The analysis highlights the importance of auction design in achieving desirable outcomes, and suggests that a well-designed competitive bidding program could potentially generate large savings in health care.

Journal Articles

Provision of Hospital Price Information After Increases in Financial Penalties for Failure to Comply With a US Federal Hospital Price Transparency Rule

(with Edward Kong)

JAMA Network Open, 2023


Media Coverage: Politico, Becker's Hospital Review, Health Leaders Media 

Importance  Price transparency regulations aim to help patients make informed decisions about medical care, but enforcing these rules is a policy challenge. There may be an association between financial penalties and hospital compliance for enforcing price transparency regulations.

Objective  To evaluate the association between financial penalties and acute care hospital compliance with the 2021 Centers for Medicare & Medicaid Services (CMS) Price Transparency Rule.

Design, Setting, and Participants  This cohort study uses an instrumental variable design to evaluate the responses of 4377 acute care hospitals in the US operating in 2021 and 2022 to changes in financial penalties in the context of a federal rule requiring hospitals to disclose privately negotiated prices.

Exposure  Changes in noncompliance penalties between 2021 and 2022 based on a nonlinear function of bed counts.

Main Outcomes and Measures  Whether hospitals publicly posted a machine-readable file with private, payer-specific negotiated prices at the service-code level. Negative controls were used to address confounding.

Results  The final sample included 4377 hospitals. Compliance increased from 70.4% (n = 3082) in 2021 to 87.7% (n = 3841) in 2022, with 90.2% of hospitals (n = 3948) reporting prices in at least 1 year. Noncompliance penalties increased from $109 500/y in 2021 to a mean (SD) of $510 976 ($534 149)/y in 2022. Penalties in 2022 were substantial, averaging 0.49% of total hospital revenue, 0.53% of total hospital costs, and 1.3% of total employee wages. Compliance increases were significantly positively correlated with penalty increases: a $500 000 increase in penalty was associated with a 2.9–percentage point (95% CI, 1.7-4.2 percentage points; P < .001) increase in compliance. Results were robust to controlling for observable hospital characteristics. No associations were found for preperiod (2021) compliance or ranges of bed counts where penalties do not vary.

Conclusions and Relevance  In this cohort study of 4377 hospitals, compliance with the CMS Price Transparency Rule was associated with increased financial penalties. These findings are relevant for the enforcement of other regulations designed to promote transparency in health care.

Financial Incentives to Facilities and Clinicians Treating Patients With End-stage Kidney Disease and Use of Home Dialysis: A Randomized Clinical Trial

(with Liran Einav, Amy Finkelstein, and Neale Mahoney)

JAMA: Health Forum, 2022

Paper | Replication Programs

Media Coverage: MedPage Today

Importance  Home dialysis rates for end-stage kidney disease (ESKD) treatment are substantially lower in the US than in other high-income countries, yet there is limited knowledge on how to increase these rates.

Objective  To report results from the first year of a nationwide randomized clinical trial that provides financial incentives to ESKD facilities and managing clinicians to increase home dialysis rates.

Design, Setting, and Participants  Results were analyzed from the first year of the End-Stage Renal Disease Treatment Choice (ETC) model, a multiyear, mandatory-participation randomized clinical trial designed and implemented by the US Center for Medicare & Medicaid Innovation. Data were reported on Medicare patients with ESKD 66 years or older who initiated treatment with dialysis in 2021, with data collection through December 31, 2021; the study included all eligible ESKD facilities and managing clinicians. Eligible hospital referral regions (HRRs) were randomly assigned to the ETC (91 HRRs) or a control group (211 HRRs).

Interventions  The ESKD facilities and managing clinicians received financial incentives for home dialysis use.

Main Outcomes and Measures  The primary outcome was the percentage of patients with ESKD who received any home dialysis during the first 90 days of treatment. Secondary outcomes included other measures of home dialysis and patient volume and characteristics.

Results  Among the 302 HRRs eligible for randomization, 18 621 eligible patients initiated dialysis treatment during the study period (mean [SD] age, 74.8 [1.05] years; 7856 women [42.1%]; 10 765 men [57.9%]; 859 Asian [5.2%], 3280 [17.7%] Black, 730 [4.3%] Hispanic, 239 North American Native, and 12 394 managing clinicians. The mean (SD) share of patients with any home dialysis during the first 90 days was 20.6% (7.8%) in the control group and was 0.12 percentage points higher (95% CI, −1.42 to 1.65 percentage points; P = .88) in the ETC group, a statistically nonsignificant difference. None of the secondary outcomes differed significantly between groups.

Conclusions and Relevance  The trial results found that in the first year of the US Center for Medicare & Medicaid Innovation–designed ETC model, HRRs assigned to the model did not have statistically significantly different rates in home dialysis compared with control HRRs. This raises questions about the efficacy of the financial incentives provided, although further evaluation is needed, as the size of these incentives will increase in subsequent years.

US Hospital Characteristics Associated With Price Transparency Regulation Compliance

(with Edward Kong)

JAMA: Health Forum, 2022


Media Coverage: Health Leaders Media

As of January 1, 2021, the Centers for Medicare & Medicaid Services (CMS) required all US acute care hospitals to release the prices they negotiate with insurance plans to make price comparison across hospitals easier for consumers. We report data on compliance with this requirement for all 4484 acute care hospitals in the US as of December 2021 and explore the association between hospital characteristics and compliance.

Voluntary Regulation: Evidence from Medicare Payment Reform 

(with Liran Einav, Amy Finkelstein, and Neale Mahoney)

Quarterly Journal of Economics, 2022.

Paper | Online Appendix | Estimation Programs

Government programs are often offered on an optional basis to market participants. We explore the economics of such voluntary regulation in the context of a Medicare payment reform, in which one medical provider receives a single, predetermined payment for a sequence of related healthcare services, instead of separate service-specific payments. This “bundled payment” program was originally implemented as a 5-year randomized trial, with mandatory participation by hospitals assigned to the new payment model; however, after two years, participation was made voluntary for half of these hospitals. Using detailed claim-level data, we document that voluntary participation is more likely for hospitals that can increase revenue without changing behavior (“selection on levels”) and for hospitals that had large changes in behavior when participation was mandatory (“selection on slopes”). To assess outcomes under counterfactual regimes, we estimate a stylized model of responsiveness to and selection into the program. We find that the current voluntary regime generates inefficient transfers to hospitals, and that alternative (feasible) designs could reduce these inefficient transfers and raise welfare. Our analysis highlights key design elements to consider under voluntary regulation.

Randomized Trial Shows Healthcare Payment Reform Has Equal-Sized Spillover Effects on Patients Not Targeted by Reform

(with Liran Einav, Amy Finkelstein, and Neale Mahoney)

Proceedings of the National Academy of Sciences of the United States of America, 2020.

Paper | Summary of Study on J-PAL

Media Coverage: The New York Times 

Changes in the way health insurers pay healthcare providers may not only directly affect the insurer’s patients but may also affect patients covered by other insurers. We provide evidence of such spillovers in the context of a nationwide Medicare bundled payment reform that was implemented in some areas of the country but not in others, via random assignment. We estimate that the payment reform—which targeted traditional Medicare patients—had effects of similar magnitude on the healthcare experience of nontargeted, privately insured Medicare Advantage patients. We discuss the implications of these findings for estimates of the impact of healthcare payment reforms and more generally for the design of healthcare policy.

Health Care Spending, Utilization, and Quality 8 Years into Global Payment

(with Zirui Song, Dana Safran, and Michael Chernew)

New England Journal of Medicine, 2019.


Media Coverage: The Boston Globe, The Harvard Gazette, WBUR, Becker's Hospital Review, Health Leaders Media, FierceHealthcare, and Yahoo Finance

Background Population-based global payment gives health care providers a spending target for the care of a defined group of patients. We examined changes in spending, utilization, and quality through 8 years of the Alternative Quality Contract (AQC) of Blue Cross Blue Shield (BCBS) of Massachusetts, a population-based payment model that includes financial rewards and penalties (two-sided risk).

Methods Using a difference-in-differences method to analyze data from 2006 through 2016, we compared spending among enrollees whose physician organizations entered the AQC starting in 2009 with spending among privately insured enrollees in control states. We examined quantities of sentinel services using an analogous approach. We then compared process and outcome quality measures with averages in New England and the United States.

Results During the 8-year post-intervention period from 2009 to 2016, the increase in the average annual medical spending on claims for the enrollees in organizations that entered the AQC in 2009 was $461 lower per enrollee than spending in the control states (P<0.001), an 11.7% relative savings on claims. Savings on claims were driven in the early years by lower prices and in the later years by lower utilization of services, including use of laboratory testing, certain imaging tests, and emergency department visits. Most quality measures of processes and outcomes improved more in the AQC cohorts than they did in New England and the nation in unadjusted analyses. Savings were generally larger among subpopulations that were enrolled longer. Enrollees of organizations that entered the AQC in 2010, 2011, and 2012 had medical claims savings of 11.9%, 6.9%, and 2.3%, respectively, by 2016. The savings for the 2012 cohort were statistically less precise than those for the other cohorts. In the later years of the initial AQC cohorts and across the years of the later-entry cohorts, the savings on claims exceeded incentive payments, which included quality bonuses and providers’ share of the savings below spending targets.

Conclusion During the first 8 years after its introduction, the BCBS population-based payment model was associated with slower growth in medical spending on claims, resulting in savings that over time began to exceed incentive payments. Unadjusted measures of quality under this model were higher than or similar to average regional and national quality measures. (Funded by the National Institutes of Health.)

Mandatory Medicare Bundled Payment Program for Lower Extremity Joint Replacement and Discharge to Institutional Postacute CareInterim Analysis of the First Year of a 5-Year Randomized Trial

(with Amy Finkelstein, Neale Mahoney, and Jonathan Skinner)

JAMA, 2018.

Paper | Replication Programs | Summary of Study on J-PAL

Media Coverage: Bloomberg, The New York Times, Orthopedics Today

Importance  Bundled payments are an increasingly common alternative payment model for Medicare, yet there is limited evidence regarding their effectiveness.

Objective  To report interim outcomes from the first year of implementation of a bundled payment model for lower extremity joint replacement (LEJR).

Design, Setting, and Participants  As part of a 5-year, mandatory-participation randomized trial by the Centers for Medicare & Medicaid Services, eligible metropolitan statistical areas (MSAs) were randomized to the Comprehensive Care for Joint Replacement (CJR) bundled payment model for LEJR episodes or to a control group. In the first performance year, hospitals received bonus payments if Medicare spending for LEJR episodes was below the target price and hospitals met quality standards. This interim analysis reports first-year data on LEJR episodes starting April 1, 2016, with data collection through December 31, 2016.

Exposure  Randomization of MSAs into the CJR bundled payment model group (75 assigned; 67 included) or to the control group without the CJR model (121 assigned; 121 included). Instrumental variable analysis was used to evaluate the relationship between inclusion of MSAs in the CJR model and outcomes.

Main Outcomes and Measures  The primary outcome was share of LEJR admissions discharged to institutional postacute care. Secondary outcomes included the number of days in institutional postacute care, discharges to other locations, Medicare spending during the episode (overall and for institutional postacute care), net Medicare spending during the episode, LEJR patient volume and patient case mix, and quality-of-care measures.

Results  Among the 196 MSAs and 1633 hospitals, 131 285 eligible LEJR procedures were performed during the study period (mean volume, 110 LEJR episodes per hospital) among 130 343 patients (mean age, 72.5 [SD, 0.91] years; 65% women; 90% white). The mean percentage of LEJR admissions discharged to institutional postacute care was 33.7% (SD, 11.2%) in the control group and was 2.9 percentage points lower (95% CI, −4.95 to −0.90 percentage points) in the CJR group. Mean Medicare spending for institutional postacute care per LEJR episode was $3871 (SD, $1394) in the control group and was $307 lower (95% CI, −$587 to −$27) in the CJR group. Mean overall Medicare spending per LEJR episode was $22 872 (SD, $3619) in the control group and was $453 lower (95% CI, −$909 to $3) in the CJR group, a statistically nonsignificant difference. None of the other secondary outcomes differed significantly between groups.

Conclusions and Relevance  In this interim analysis of the first year of the CJR bundled payment model for LEJR among Medicare beneficiaries, MSAs covered by CJR, compared with those that were not, had a significantly lower percentage of discharges to institutional postacute care but no significant difference in total Medicare spending per LEJR episode. Further evaluation is needed as the program is more fully implemented.

Punishment Can Support Cooperation Even When Punishable

(with Tingting Fu, Kenju Kamei, and Louis Putterman)

Economic Letters, 2017.


Do opportunities to punish non-punishers help to stabilize cooperation? Or do opportunities to punish punishers harm cooperation and its benefits by deterring first order punishment and wasting resources? We compare treatments of a decision experiment without peer punishment and with one order of punishment to ones in which subjects can be punished for punishing or for failing to punish. Our treatments with higher-order punishment achieve as much improvement in cooperation as those with only one punishment stage. We see evidence of social norms in action, but no evidence of punishing failure to punish. These results suggest that higher-order punishment is neither critical to nor a major deterrent to cooperation.

Selected Research Papers in Progress

Targeting Overuse of Home Health Care: Evidence from Multiple Policy Instruments

(with Liran Einav, Amy Finkelstein, and Neale Mahoney)

We compare the impact of the three very different policy instruments which have been deployed - individually and in combination - to reduce wasteful use of Medicare-financed home health care: strike force prosecutions of suspected fraud, moratoria on the entry of new home health agencies, and caps on outlier payments received by home health agencies. We find that each policy reduced home health care use by an average annual 20 to 30 percent over five years. Medicare home health care is designed to provide care for patients who would otherwise be in a nursing home but, consistent with the notion that this home care was 'waste', we find no substantive or statistical evidence that these large policy-induced reductions in home care are associated with any substitution toward nursing home care, either overall or for patients at high risk of using a nursing home. Given the apparent effectiveness of these policies, we then consider the counterfactual performance of alternative applications of these policies across the country, holding the budget allocated to the two geographically targeted policies (strike forces and moratoria) fixed. Exploiting estimated treatment effect heterogeneity across patient and home health care provider characteristics, our findings suggest that while strike force and moratoria are targeted at places with higher-than-average treatment effects, in the presence of the outlier payment cap optimal geographic targeting of these policies could have more than doubled their impact. These findings underscore the value of coordination across policies pursuing similar objectives.

The Long-Run Impacts of Regulated Price Cuts: Evidence from Medicare

(with Parker Rogers)

We examine how regulated price cuts affect innovation, market structure, and product quality. We exploit a series of Medicare price cuts for durable medical equipment (DME), which lowered the Medicare reimbursement prices of some DME categories by 21%, leaving others unaffected. Following the price cuts, new device introductions fell by 25%, indicating a price elasticity of 1.2, accompanied by a decrease in patenting and R&D spending. Entry by domestic manufacturers decreased by 76% while production offshoring increased. These shifts resulted in deteriorated product quality, evidenced by increased repair and replacement rates and adverse event reports. Our findings highlight the importance of considering these long-run consequences when designing price regulations.

The Value of Hospice Care: Evidence from Facility Openings

(with Edward Kong)