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On the effect of prospective payment system on hospital efficiency and competition for patients in Germany

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  • Herwartz, Helmut
  • Strumann, Christoph

Abstract

The introduction of hospital reimbursement based on diagnosis related groups (DRG) in 2004 has been a conspicuous attempt to increase hospital efficiency in the German health sector. In this paper changes of hospital efficiency, quantified as a Malmquist index decomposition in pure technical efficiency change, are analyzed for periods before and after the reform. We implement a two-stage semi-parametric efficiency model that allows for spatial interdependence among hospitals. The results reveal an enhancement in overall efficiency after the DRG introduction. Moreover, an increase in the magnitude of negative spatial spillovers among German hospital performance can be diagnosed. This result is in line with a rise of competition for (low cost) patients.

Suggested Citation

  • Herwartz, Helmut & Strumann, Christoph, 2011. "On the effect of prospective payment system on hospital efficiency and competition for patients in Germany," Economics Working Papers 2011-03, Christian-Albrechts-University of Kiel, Department of Economics.
    • Handle: RePEc:zbw:cauewp:201103
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    References listed on IDEAS

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    1. Margit Sommersguter-Reichmann, 2000. "The impact of the Austrian hospital financing reform on hospital productivity: empirical evidence on efficiency and technology changes using a non-parametric input-based Malmquist approach," Health Care Management Science, Springer, vol. 3(4), pages 309-321, September.
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    More about this item

    Keywords

    hospital effciency; data envelopment analysis; spatial analysis; diagnosis related groups;
    All these keywords.

    JEL classification:

    • C21 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Cross-Sectional Models; Spatial Models; Treatment Effect Models
    • D61 - Microeconomics - - Welfare Economics - - - Allocative Efficiency; Cost-Benefit Analysis
    • I11 - Health, Education, and Welfare - - Health - - - Analysis of Health Care Markets
    • I18 - Health, Education, and Welfare - - Health - - - Government Policy; Regulation; Public Health

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