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How Do Hospitals Respond To Price Changes?Evidence From Norway

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Author Info

  • Janueleviciute, Jurgita

    ()
    (Department of Economics, University of Bergen)

  • Askildsen, Jan Erik

    ()
    (UniRokkansenteret)

  • Kaarbøe, Oddvar

    ()
    (Department of Economics, University of Bergen)

  • Siciliani, Luigi

    ()
    (Department of Economics and Related Studies, University of York)

  • Sutton, Matt

    ()
    (Centre for Health Economics, University of Manchester)

Abstract

Many publicly funded health systems use prospective activity-based financing to increase hospital production and efficiency. The aim of this study is to investigate whether price changes for different treatments affect the mix of activity provided by hospitals. We exploit variations in prices created by changes in the national average treatment cost per DRG offered to Norwegian hospitals over a period of five years (2003-2007). We use data from the Norwegian Patient Register, containing individual-level information on age, gender, type of treatment, diagnosis, number of co-morbidities and the national average treatment costs per DRG. To examine the changes in activity within the DRGs over time, fixed-effect models are applied. The results suggest that a ten-percent increase in price leads to a rise of one percent in the number of patients treated. This increase is mainly due to more admission of emergency patients, rather than to increases in elective activity.

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Bibliographic Info

Paper provided by University of Bergen, Department of Economics in its series Working Papers in Economics with number 15/12.

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Length: 26 pages
Date of creation: 08 Mar 2013
Date of revision:
Handle: RePEc:hhs:bergec:2012_015

Contact details of provider:
Postal: Institutt for økonomi, Universitetet i Bergen, Postboks 7802, 5020 Bergen, Norway
Phone: (+47)55589200
Fax: (+47)55589210
Email:
Web page: http://www.uib.no/econ/en
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Keywords: Hospitals; DRGs; prices; activity;

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  1. Chalkley, M. & Malcomson, J.M., 1998. "Government purchasing of health services," Discussion Paper Series In Economics And Econometrics 9821, Economics Division, School of Social Sciences, University of Southampton.
  2. Chalkley, M. & Malcomson, J.M., 1995. "Contracting for health services when patient demand does not reflect quality," Discussion Paper Series In Economics And Econometrics 9514, Economics Division, School of Social Sciences, University of Southampton.
  3. Biørn, Erik & Hagen, Terje P. & Iversen, Tor & Magnussen, Jon, 2009. "The effect of activity-based financing on hospital efficiency: A panel data analysis of DEA efficiency scores 1992-2000," HERO On line Working Paper Series 2002:8, Oslo University, Health Economics Research Programme.
  4. Ching-to Albert Ma, 1994. "Health Care Payment Systems: Cost and Quality Incentives," Papers 0047, Boston University - Industry Studies Programme.
  5. Kaarboe, Oddvar Martin & Siciliani, Luigi, 2008. "Multitasking, Quality and Pay for Performance," CEPR Discussion Papers 6911, C.E.P.R. Discussion Papers.
  6. Chalkley, Martin & Malcomson, James M, 1998. "Contracting for Health Services with Unmonitored Quality," Economic Journal, Royal Economic Society, vol. 108(449), pages 1093-1110, July.
  7. Richard C. Lindrooth & Gloria J. Bazzoli & Jan Clement, 2007. "The Effect of Reimbursement on the Intensity of Hospital Services," Southern Economic Journal, Southern Economic Association, vol. 73(3), pages 575–587, January.
  8. Luigi Siciliani & Elín J. G. Hafsteinsdóttir, 2008. "DRG prospective payment system: refine or not refine?," Discussion Papers 08/29, Department of Economics, University of York.
  9. Ellis, Randall P. & McGuire, Thomas G., 1986. "Provider behavior under prospective reimbursement : Cost sharing and supply," Journal of Health Economics, Elsevier, vol. 5(2), pages 129-151, June.
  10. Dranove, David & Wehner, Paul, 1994. "Physician-induced demand for childbirths," Journal of Health Economics, Elsevier, vol. 13(1), pages 61-73, March.
  11. Miraldo, Marisa & Siciliani, Luigi & Street, Andrew, 2011. "Price adjustment in the hospital sector," Journal of Health Economics, Elsevier, vol. 30(1), pages 112-125, January.
  12. 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.
  13. Hagen, Terje P. & Kaarboe, Oddvar M., 2006. "The Norwegian hospital reform of 2002: Central government takes over ownership of public hospitals," Health Policy, Elsevier, vol. 76(3), pages 320-333, May.
  14. Leemore S. Dafny, 2005. "How Do Hospitals Respond to Price Changes?," American Economic Review, American Economic Association, vol. 95(5), pages 1525-1547, December.
  15. Magnussen, Jon & Hagen, Terje P. & Kaarboe, Oddvar M., 2007. "Centralized or decentralized? A case study of Norwegian hospital reform," Social Science & Medicine, Elsevier, vol. 64(10), pages 2129-2137, May.
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