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Faculty members from the Perelman School of Medicine and the Wharton School are crossing disciplinary lines in order to combat rising healthcare costs.

The University of Pennsylvania Health System is collaborating with the Leonard Davis Institute for Health Incentives to introduce the new Center for Innovations in Health Care Financing.

The recently-opened center combines faculty from Wharton and Penn Med to research how ideas in behavioral economics — the study of how social, cognitive and emotional factors influence our economic decisions — can be used to improve patient health and reduce healthcare costs.

The United States spends approximately 2.5 trillion dollars in health care each year according to Kevin Volpp, director of the LDI Center for Health Incentives and co-leader of the Center for Health Care Financing. “There is a big need for people to figure out how to make more effective use of the money spent in healthcare in order to achieve cost-effective improvements,” Volpp said.

Research initiatives have not yet begun for the center, but should start later this fall, according to Volpp.

The center seeks to meet this need by taking advantage of the “largely unrealized potential for synergy between faculty in health economics and behavioral economics,” Volpp explained. The center will “catalyze new research activity” between these disciplines in order to achieve a greater value in health care.

One of the premier goals of the center is to think more critically about how behavioral economics can help solve health problems. “Nobody in the country has really figured out how to use behavioral economics to improve healthcare delivery,” Volpp said.

“Behavioral economics is a kind of theory about everyday life, not just a theory about health care,” said David Asch, executive director of the LDI and professor of Health Care Management and Economics at Wharton. “We don’t always do things in our best interest. People smoke, people eat chocolate cake, people don’t wear their seatbelts. Behavioral economics is an approach to thinking why we make those errors and if there are ways to correct them.”

One insight from behavioral economics is the idea of healthcare incentives. “An incentive might be monetary rewards like lottery tickets or non-monetary rewards like the ‘weight-loss of the month’ award,” Mark Pauly, professor of Health Care Management at Wharton said. “We are all motivated by a combination of financial and non-financial incentives,” he said, adding that the new center aims “to find incentives to get people to adopt changes to keep them healthier.”

“Most of the things we do are not related to our health care,” Asch said. “Unless healthcare systems can think of the psychology of everyday life, they are missing out on the enormous opportunities to improve their health and health care. As long as we are constrained to the walls of the doctor’s office … we are going to be very limited on what we can do.”

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