Does prospective payment increase hospital (in)efficiency? Evidence from the Swiss hospital sector
AbstractSeveral European countries have followed the United States in introducing prospective payment for hospitals with the expectation of achieving cost efficiency gains. This article examines whether theoretical expectations of cost efficiency gains can be empirically confirmed. In contrast to previous studies, the analysis of Switzerland provides a comparison of a retrospective per diem payment system with a prospective global budget and a payment per patient case system. Using a sample of approximately 90 public financed Swiss hospitals during the years 2004 to 2009 and Bayesian inference of a standard and a random parameter frontier model, cost efficiency gains are found, particularly with a payment per patient case system. Payment systems designed to put hospitals at operating risk are more effective than retrospective payment systems. However, hospitals are heterogeneous with respect to their production technologies, making a random parameter frontier model the superior specification for Switzerland.
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
Bibliographic InfoPaper provided by Department of Economics - University of Zurich in its series ECON - Working Papers with number 053.
Date of creation: Dec 2011
Date of revision:
Hospital inefficiency; prospective payment system; Bayesian inference; stochastic frontier analysis;
Find related papers by JEL classification:
- C11 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Bayesian Analysis: General
- C23 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Models with Panel Data; Spatio-temporal Models
- D24 - Microeconomics - - Production and Organizations - - - Production; Cost; Capital; Capital, Total Factor, and Multifactor Productivity; Capacity
- I18 - Health, Education, and Welfare - - Health - - - Government Policy; Regulation; Public Health
This paper has been announced in the following NEP Reports:
- NEP-ALL-2012-01-03 (All new papers)
- NEP-EFF-2012-01-03 (Efficiency & Productivity)
- NEP-HEA-2012-01-03 (Health Economics)
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Mehdi Farsi & Massimo Filippini, 2006. "An Analysis of Efficiency and Productivity in Swiss Hospitals," Swiss Journal of Economics and Statistics (SJES), Swiss Society of Economics and Statistics (SSES), vol. 142(I), pages 1-37, March.
- 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.
- Biorn, Erik & Hagen, Terje P. & Iversen, Tor & Magnussen, Jon, 2006.
"Heterogeneity in Hospitals' Responses to a Financial Reform: A Random Coefficient Analysis of The Impact of Activity-Based Financing on Efficiency,"
8169, University Library of Munich, Germany.
- Eric, Biørn & Hagen, Terje P. & Iversen, Tor & Magnussen, Jon, 2009. "Heterogenety in hospitals responses to a financial reform: A random coefficient analysis of the impact of activity-based financing on efficiency," HERO On line Working Paper Series 2006:9, Oslo University, Health Economics Research Programme.
- Simar, L. & Wilson, P.W., 1999.
"Statistical Inference in Nonparametric Frontier Models: the State of the Art,"
9904, Catholique de Louvain - Institut de statistique.
- Léopold Simar & Paul Wilson, 2000. "Statistical Inference in Nonparametric Frontier Models: The State of the Art," Journal of Productivity Analysis, Springer, vol. 13(1), pages 49-78, January.
- Efthymios G. Tsionas, 2002.
"Stochastic frontier models with random coefficients,"
Journal of Applied Econometrics,
John Wiley & Sons, Ltd., vol. 17(2), pages 127-147.
- Tsionas, E.G., 2001. "Stochastic Frontier Models with Random Coefficients," Athens University of Economics and Business 130, Athens University of Economics and Business, Department of International and European Economic Studies.
- Tsionas, E.G., 2001. "Stochastic Frontier Models with Random Coefficients," DEOS Working Papers 130, Athens University of Economics and Business.
- Joseph P. Newhouse, 1996. "Reimbursing Health Plans and Health Providers: Efficiency in Production versus Selection," Journal of Economic Literature, American Economic Association, vol. 34(3), pages 1236-1263, September.
- Aigner, Dennis & Lovell, C. A. Knox & Schmidt, Peter, 1977. "Formulation and estimation of stochastic frontier production function models," Journal of Econometrics, Elsevier, vol. 6(1), pages 21-37, July.
- Luis Orea & Subal C. Kumbhakar, 2004. "Efficiency measurement using a latent class stochastic frontier model," Empirical Economics, Springer, vol. 29(1), pages 169-183, January.
- Koop, Gary & Osiewalski, Jacek & Steel, Mark F. J., 1997.
"Bayesian efficiency analysis through individual effects: Hospital cost frontiers,"
Journal of Econometrics,
Elsevier, vol. 76(1-2), pages 77-105.
- Koop, G. & Osiewalski, J. & Steel, M. F. J., . "Bayesian efficiency analysis through individual effects: Hospital cost frontiers," CORE Discussion Papers RP -1245, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
- KOOP , Gary & OSIEWALSKI , Jacek & STEEL , Mark, 1995. "Bayesian Efficiency Analysis through Individual Effects : Hospital Cost Frontiers," CORE Discussion Papers 1995036, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
- 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.
- Biorn, Erik & Hagen, Terje P. & Iversen, Tor & Magnussen, Jon, 2002. "The Effect of Activity-Based Financing on Hospital Efficiency: A Panel Data Analysis of DEA Efficiency Scores 1992-2000," MPRA Paper 8099, University Library of Munich, Germany.
- 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.
- Chalkley, Martin & Malcomson, James M., 1998. "Contracting for health services when patient demand does not reflect quality," Journal of Health Economics, Elsevier, vol. 17(1), pages 1-19, January.
- Jim Griffin & Mark Steel, 2005.
"Bayesian Stochastic Frontier Analysis Using WinBUGS,"
- Jim Griffin & Mark Steel, 2007. "Bayesian stochastic frontier analysis using WinBUGS," Journal of Productivity Analysis, Springer, vol. 27(3), pages 163-176, June.
- Philippe K. Widmer & Peter Zweifel & Mehdi Farsi, 2011.
"Accounting for heterogeneity in the measurement of hospital performance,"
ECON - Working Papers
052, Department of Economics - University of Zurich.
- Philippe K Widmer & Peter Zweifel & Mehdi Farsi, 2010. "Accounting For Heterogeneity In The Measurement of Hospital Performance," Economics Discussion / Working Papers 10-21, The University of Western Australia, Department of Economics.
- Mehdi Farsi & Massimo Filippini & William Greene, 2006. "Application Of Panel Data Models In Benchmarking Analysis Of The Electricity Distribution Sector ," Annals of Public and Cooperative Economics, Wiley Blackwell, vol. 77(3), pages 271-290, 09.
- repec:pra:mprapa:8100 is not listed on IDEAS
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Marita Kieser).
If references are entirely missing, you can add them using this form.