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DRGs: the link between investment in technologies and appropriateness

Author

Listed:
  • Rosella Levaggi

    (University of Brescia)

  • Michele Moretto

    (University of Padova)

  • Paolo Pertile

    (Department of Economics (University of Verona))

Abstract

In this paper we investigate the relationship between the DRG system for hospital reimbursement and investment in technologies. We use a simple economic model where the reimbursement policy for treatments whose provision requires a sunk investment cost has an impact on both the decision whether to adopt the technology and many patients to treat with it. The optimal pricing policy involves a two-part tariff: a price equal to the marginal cost of the patient whose benefit of treatment equals the cost of provision, and a separate payment for the partial reimbursement of capital costs. Departures from this scheme, which are frequent in DRG tariff systems designed around the world, lead to a trade-off between the objective of making effective technologies available to patients and the need to ensure appropriateness in use.

Suggested Citation

  • Rosella Levaggi & Michele Moretto & Paolo Pertile, 2012. "DRGs: the link between investment in technologies and appropriateness," Working Papers 31/2012, University of Verona, Department of Economics.
    • Handle: RePEc:ver:wpaper:31/2012
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    References listed on IDEAS

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    Cited by:

    1. Finocchiaro Castro, Massimo & Guccio, Calogero & Pignataro, Giacomo & Rizzo, Ilde, 2014. "The effects of reimbursement mechanisms on medical technology diffusion in the hospital sector in the Italian NHS," Health Policy, Elsevier, vol. 115(2), pages 215-229.

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    More about this item

    Keywords

    DRG; prospective payment; appropriateness; capital cost; health care investment;
    All these keywords.

    JEL classification:

    • I18 - Health, Education, and Welfare - - Health - - - Government Policy; Regulation; Public Health

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