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Does Prospective Payment Increase Hospital (In)Efficiency? Evidence from the Swiss Hospital Sector


Widmer, Philippe K (2011). Does Prospective Payment Increase Hospital (In)Efficiency? Evidence from the Swiss Hospital Sector. Working paper series / Department of Economics No. 53, University of Zurich.

Abstract

Several European countries have followed the United States in introducing prospective payment for hospitals with the expectation of achieving cost efficiency gains. This article examines whether theoretical expectations of cost efficiency gains can be empirically confirmed. In contrast to previous studies, the analysis of Switzerland provides a comparison of a retrospective per diem payment system with a prospective global budget and a payment per patient case system. Using a sample of approximately 90 public financed Swiss hospitals during the years 2004 to 2009 and Bayesian inference of a standard and a random parameter frontier model, cost efficiency gains are found, particularly with a payment per patient case system. Payment systems designed to put hospitals at operating risk are more effective than retrospective payment systems. However, hospitals are heterogeneous with respect to their production technologies, making a random parameter frontier model the superior specification for Switzerland.

Several European countries have followed the United States in introducing prospective payment for hospitals with the expectation of achieving cost efficiency gains. This article examines whether theoretical expectations of cost efficiency gains can be empirically confirmed. In contrast to previous studies, the analysis of Switzerland provides a comparison of a retrospective per diem payment system with a prospective global budget and a payment per patient case system. Using a sample of approximately 90 public financed Swiss hospitals during the years 2004 to 2009 and Bayesian inference of a standard and a random parameter frontier model, cost efficiency gains are found, particularly with a payment per patient case system. Payment systems designed to put hospitals at operating risk are more effective than retrospective payment systems. However, hospitals are heterogeneous with respect to their production technologies, making a random parameter frontier model the superior specification for Switzerland.

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Additional indexing

Item Type:Working Paper
Communities & Collections:03 Faculty of Economics > Department of Economics
Working Paper Series > Department of Economics
Dewey Decimal Classification:330 Economics
JEL Classification:C11, C23, D24, I18
Uncontrolled Keywords:Hospital inefficiency, prospective payment system, Bayesian inference, stochastic frontier analysis
Language:English
Date:December 2011
Deposited On:20 Dec 2011 15:47
Last Modified:05 Apr 2016 15:17
Series Name:Working paper series / Department of Economics
Number of Pages:23
ISSN:1664-7041 (P) 1664-705X (E)
Official URL:http://www.econ.uzh.ch/static/wp/econwp053.pdf
Related URLs:http://www.econ.uzh.ch/static/workingpapers.php
Permanent URL: https://doi.org/10.5167/uzh-53570

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