DRGs: the link between investment in technologies and appropriateness
AbstractIn 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.
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Bibliographic InfoPaper provided by University of Verona, Department of Economics in its series Working Papers with number 31/2012.
Date of creation: Nov 2012
Date of revision:
DRG; prospective payment; appropriateness; capital cost; health care investment;
Find related papers by JEL classification:
- I18 - Health, Education, and Welfare - - Health - - - Government Policy; Regulation; Public Health
This paper has been announced in the following NEP Reports:
- NEP-ALL-2012-12-06 (All new papers)
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