Seeing the forest for the trees: Institutional environment impacts on reimbursement processes and healthcare operations

Healthcare reimbursement processes perform an annual multi-trillion dollar task to remunerate healthcare organizations, physicians, and patients. Healthcare reimbursement entails coding, billing, and payment processes based on care provided to patients. As this research note highlights, though often implicitly assumed to be independent of care delivery processes, reimbursement processes are distinctly connected to the efficacy of care delivery. Prior research tends to examine neither antecedents nor consequences of healthcare reimbursement processes and their operational implications, even though these issues can lead to unproductive externalities affecting healthcare systems and patients. Most extant literature tends to focus on medical task environments, with far less attention given to how institutional environment structures reimbursement and thus drives stakeholder incentives and behaviors. Because of a wide diversity of institutional environments, reimbursement processes differ on a nation-by-nation basis, and within nations on a state, province, city, or even within-city basis. The varied and complex reimbursement processes drive divergent stakeholder incentives, varying use of healthcare protocols and processes, and differing patient outcomes. Even within a single reimbursement regime, a multitude of reimbursement policies, required processes, and payer institutions creates operational complexity for physicians and their professional staff, which ultimately affects patient care delivery processes and outcomes. The task environment focus of extant healthcare OM research suggests a need to understand institutional environment antecedents, natures, and impacts of reimbursement processes. This research note illustrates the seemingly simple structural nature of reimbursement processes, yet also reminds researchers how diverse institutional environments, built to accomplish different healthcare aims, can lead to similar levels of enormous process complexity. The research note further motivates how such phenomena may affect research findings and the quest for operational solutions to healthcare dilemmas. By focusing on healthcare reimbursement and its operational implications, the note provides useful insights for continued studies of healthcare operations.