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Health Economics Research Programme, University of Oslo HERO On line Working Paper Series

No 2015:1:
Do changes in reimbursement fees affect hospital prioritization?

Hans Olav Melberg () and Kine Pedersen ()

Abstract: It has been argued that activity based payment systems make hospitals focus on the diagnostic groups that are most profitable given costs and reimbursement rates. This article tests the hypothesis by exploring the relationship between changes in the DRG reimbursement rates and changes in the number of registered treatment episodes for all DRG-codes and hospitals in Norway between 2006 and 2013. The results show that hospitals increase the number of admissions in a diagnostic group when the reimbursement rate is increased, and decrease it (or increase it less) when DRG-rates are reduced. Across all treatments, during all years included in our primary analysis, the increase in volume is about four times as large for DRG-categories with increased reimbursement compared to DRGs with decreased reimbursement rates. However, the results also show that the number of treatment episodes in a diagnostic category is affected by many other factors in addition to the economic incentives.

Keywords: DRG; activity based payment system; distortions; effect of financial incentives; priorities; (follow links to similar papers)

JEL-Codes: I10; I12; I18; (follow links to similar papers)

28 pages, January 8, 2015

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