IDEAS home Printed from https://ideas.repec.org/a/wly/hlthec/v26y2017i12pe81-e102.html
   My bibliography  Save this article

Do Capitation‐based Reimbursement Systems Underfund Tertiary Healthcare Providers? Evidence from New Zealand

Author

Listed:
  • Somi Shin
  • Christoph Schumacher
  • Eberhard Feess

Abstract

One of the main concerns about capitation‐based reimbursement systems is that tertiary institutions may be underfunded due to insufficient reimbursements of more complicated cases. We test this hypothesis with a data set from New Zealand that, in 2003, introduced a capitation system where public healthcare provider funding is primarily based on the characteristics of the regional population. Investigating the funding for all cases from 2003 to 2011, we find evidence that tertiary providers are at a disadvantage compared with secondary providers. The reasons are that tertiary providers not only attract the most complicated, but also the highest number of cases. Our findings suggest that accurate risk adjustment is crucial to the success of a capitation‐based reimbursement system. Copyright © 2017 John Wiley & Sons, Ltd.

Suggested Citation

  • Somi Shin & Christoph Schumacher & Eberhard Feess, 2017. "Do Capitation‐based Reimbursement Systems Underfund Tertiary Healthcare Providers? Evidence from New Zealand," Health Economics, John Wiley & Sons, Ltd., vol. 26(12), pages 81-102, December.
    • Handle: RePEc:wly:hlthec:v:26:y:2017:i:12:p:e81-e102
    DOI: 10.1002/hec.3478
    as

    Download full text from publisher

    File URL: https://doi.org/10.1002/hec.3478
    Download Restriction: no
    File URL: https://libkey.io/10.1002/hec.3478?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    References listed on IDEAS

    as
    1. Brigitte Dormont & Carine Milcent, 2004. "The sources of hospital cost variability," Health Economics, John Wiley & Sons, Ltd., vol. 13(10), pages 927-939, October.
    2. Siciliani, Luigi, 2006. "Selection of treatment under prospective payment systems in the hospital sector," Journal of Health Economics, Elsevier, vol. 25(3), pages 479-499, May.
    3. Ma, Ching-to Albert, 1994. "Health Care Payment Systems: Cost and Quality Incentives," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 3(1), pages 93-112, Spring.
    4. Danzon, Patricia M., 1985. "Liability and liability insurance for medical malpractice," Journal of Health Economics, Elsevier, vol. 4(4), pages 309-331, December.
    5. Lave, Judith R & Lave, Lester B, 1970. "Hospital Cost Functions," American Economic Review, American Economic Association, vol. 60(3), pages 379-395, June.
    6. repec:dau:papers:123456789/5426 is not listed on IDEAS
    7. Ching‐to Albert Ma, 1998. "Health‐Care Payment Systems: Cost and Quality Incentives—Reply," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 7(1), pages 139-142, March.
    8. Allen, Robin & Gertler, Paul J, 1991. "Regulation and the Provision of Quality to Heterogenous Consumers: The Case of Prospective Pricing of Medical Services," Journal of Regulatory Economics, Springer, vol. 3(4), pages 361-375, December.
    9. William P. Rogerson, 1994. "Choice of Treatment Intensities by a Nonprofit Hospital Under Prospective Pricing," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 3(1), pages 7-51, March.
    10. Ellis, Randall P., 1998. "Creaming, skimping and dumping: provider competition on the intensive and extensive margins1," Journal of Health Economics, Elsevier, vol. 17(5), pages 537-555, October.
    11. Sibley, Lyn M. & Glazier, Richard H., 2012. "Evaluation of the equity of age–sex adjusted primary care capitation payments in Ontario, Canada," Health Policy, Elsevier, vol. 104(2), pages 186-192.
    12. Rogerson, William P, 1994. "Choice of Treatment Intensities by a Nonprofit Hospital under Prospective Pricing," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 3(1), pages 7-51, Spring.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Mohnen Sigrid M. & Rotteveel Adriënne H. & Doornbos Gerda & Polder Johan J., 2020. "Healthcare Expenditure Prediction with Neighbourhood Variables – A Random Forest Model," Statistics, Politics and Policy, De Gruyter, vol. 11(2), pages 111-138, December.
    2. Christoph Schumacher, 2022. "Effectiveness of hospital transfer payments under a prospective payment system: An analysis of a policy change in New Zealand," Health Economics, John Wiley & Sons, Ltd., vol. 31(7), pages 1339-1346, July.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Feess, Eberhard & Ossig, Sonja, 2007. "Reimbursement schemes for hospitals, malpractice liability, and intrinsic motivation," International Review of Law and Economics, Elsevier, vol. 27(4), pages 423-441, December.
    2. Makoto Kakinaka & Ryuta Kato, 2013. "Regulated medical fee schedule of the Japanese health care system," International Journal of Health Economics and Management, Springer, vol. 13(3), pages 301-317, December.
    3. Siciliani, Luigi, 2006. "Selection of treatment under prospective payment systems in the hospital sector," Journal of Health Economics, Elsevier, vol. 25(3), pages 479-499, May.
    4. repec:rdg:wpaper:em-dp2004-25 is not listed on IDEAS
    5. Alessandra Ferrari, 2004. "The payment of hospital services: a waiting lists model," Economic Analysis Research Group Working Papers earg-wp2004-05, Henley Business School, University of Reading.
    6. Oddvar Kaarboe & Luigi Siciliani, 2011. "Multi‐tasking, quality and pay for performance," Health Economics, John Wiley & Sons, Ltd., vol. 20(2), pages 225-238, February.
    7. Sonja Ossig & Eberhard Feess, 2004. "The impact of liability for malpractice on the optimal reimbursement schemes for health services," Econometric Society 2004 Far Eastern Meetings 396, Econometric Society.
    8. François Maréchal & Lionel Thomas, 2019. "The optimal payment system for hospitals under adverse selection, moral hazard, and limited liability," Working Papers 2019-04, CRESE.
    9. Philippe Choné & Ching-to Albert Ma, 2004. "Asymmetric Information from Physician Agency : Optimal Payment and Healthcare Quantity," Working Papers 2004-37, Center for Research in Economics and Statistics.
    10. Thomas G. McGuire & Jacob Glazer, 2000. "Optimal Risk Adjustment in Markets with Adverse Selection: An Application to Managed Care," American Economic Review, American Economic Association, vol. 90(4), pages 1055-1071, September.
    11. Chalkley, Martin & McVicar, Duncan, 2008. "Choice of contracts in the British National Health Service: An empirical study," Journal of Health Economics, Elsevier, vol. 27(5), pages 1155-1167, September.
    12. Frank, Richard G. & Glazer, Jacob & McGuire, Thomas G., 2000. "Measuring adverse selection in managed health care," Journal of Health Economics, Elsevier, vol. 19(6), pages 829-854, November.
    13. Tsuyoshi Takahara, 2013. "Patient Dumping, Outlier Payments, and Optimal Healthcare Payment Policy under Asymmetric Information," ISER Discussion Paper 0891r, Institute of Social and Economic Research, Osaka University, revised Oct 2014.
    14. Levaggi, Rosella & Moretto, Michele & Pertile, Paolo, 2023. "Dynamic, incentive-compatible contracting for health services," FEEM Working Papers 338404, Fondazione Eni Enrico Mattei (FEEM).
    15. Yoshida, Atsushi & Kawamura, Akira, 2009. "Who has benefited from the health services system for the elderly in Japan?," Japan and the World Economy, Elsevier, vol. 21(3), pages 256-269, August.
    16. Tsuyoshi Takahara, 2016. "Patient dumping, outlier payments, and optimal healthcare payment policy under asymmetric information," Health Economics Review, Springer, vol. 6(1), pages 1-11, December.
    17. Vislie, Jon, 2009. "Incentive Contracts for Public Health Care Provision under Adverse Selection and Moral Hazard," HERO Online Working Paper Series 2001:6, University of Oslo, Health Economics Research Programme.
    18. Martin Chalkley & Duncan McVicar, 2001. "Contracts in the National Health Service: An Empirical Study," Dundee Discussion Papers in Economics 124, Economic Studies, University of Dundee.
    19. Chalkley, Martin & Malcomson, James M., 1998. "Contracting for health services when patient demand does not reflect quality," Journal of Health Economics, Elsevier, vol. 17(1), pages 1-19, January.
    20. Gravelle, Hugh, 1999. "Capitation contracts: access and quality," Journal of Health Economics, Elsevier, vol. 18(3), pages 315-340, June.
    21. Ellis, Randall P., 1998. "Creaming, skimping and dumping: provider competition on the intensive and extensive margins1," Journal of Health Economics, Elsevier, vol. 17(5), pages 537-555, October.

    More about this item

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:wly:hlthec:v:26:y:2017:i:12:p:e81-e102. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Wiley Content Delivery (email available below). General contact details of provider: http://www3.interscience.wiley.com/cgi-bin/jhome/5749 .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.