The impact of public hospital performance-based pay scheme reform on revenue structure and service efficiency under the Diagnosis-Intervention Packet payment system: evidence from a pilot city in China

As China transitions from fee-for-service (FFS) to case-based payment systems, the Diagnosis-Intervention Packet (DIP) system has emerged as a key approach to enhance cost containment and service efficiency. Aligning internal incentives, such as through performance-based pay schemes (PBPS), is crucial to fully realizing the intended effects of DIP. This study assessed the impact of implementing a DIP-aligned PBPS reform on hospital revenue structure and service efficiency. Using administrative data from a pilot city, we conducted controlled interrupted time series analyses, comparing public hospitals that adopted the DIP-aligned PBPS with those that retained the traditional PBPS, stratified by insurance type: Urban Employee Basic Medical Insurance (UEBMI) and Urban Resident Basic Medical Insurance (URBMI). After the reform, the intervention group showed a significant monthly decline in the proportion of drug sales in inpatient expenses (− 0.76%, P = 0.046), particularly among UEBMI patients (− 0.875%, P = 0.035), with no significant change for URBMI. The proportion of laboratory tests and examinations in inpatient expenses dropped immediately in the overall sample (− 3.479%, P = 0.006), UEBMI (− 4.246%, P = 0.006), and URBMI (− 2.922%, P = 0.025), but subsequently showed upward monthly trends (overall: 0.495%, P = 0.009; UEBMI: 0.503%, P = 0.014; URBMI: 0.461%, P = 0.016). The cost consumption index declined steadily over time (overall: −0.026, P = 0.025; UEBMI: −0.026, P = 0.040; URBMI: −0.026, P = 0.027), as did the time consumption index (overall: −0.012, P = 0.032; UEBMI: −0.015, P = 0.036; URBMI: −0.011, P = 0.045). Integrating PBPS reform with DIP payment implementation effectively reduced drug expenditures and enhanced service efficiency in public hospitals. However, the observed differences between the UEBMI and URBMI groups raise essential concerns about equity in health service delivery, and the increase in expenses for laboratory tests and examinations suggests potential gaming behavior in response to new incentives. These findings underscore the need for continuous policy monitoring and adaptive regulation to mitigate unintended effects and ensure the success of PBPS reforms.