One price for all? Sources of cost variations between public and private hospitals
AbstractWithin the framework of its activity-based payment system, introduced in 2005, the French government is now seeking to achieve price convergence between public and private hospitals. This paper questions the economic justification of this convergence by examining the literature on hospital costs variation and analyzing French hospital activity data. The literature on hospital economics identifies many factors which can generate cost differences between hospitals a part from efficiency. These include hospital size and its range of activity, differences in patient characteristics and quality of the care. The results from the literature suggest that DRG prices should be adjusted to take into account these factors, which are not always under the control of public hospitals but which have a direct impact on their costs. In addition, the analysis of French hospital activity indicates a strong partitioning of the type of care provided between the public and private sectors, corresponding to different hospital profiles. Not taking these different profiles into account when setting DRG prices could endanger the capacity of the hospital system to provide necessary care as well as equity of access.
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Bibliographic InfoPaper provided by IRDES institut for research and information in health economics in its series Working Papers with number DT25.
Length: 32 pages
Date of creation: May 2009
Date of revision: May 2009
DRG; Activity based payment; hospital cost variation; regulation; France.;
Find related papers by JEL classification:
- H3 - Public Economics - - Fiscal Policies and Behavior of Economic Agents
- H4 - Public Economics - - Publicly Provided Goods
- L8 - Industrial Organization - - Industry Studies: Services
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