IDEAS home Printed from https://ideas.repec.org/a/eee/hepoli/v120y2016i10p1171-1176.html
   My bibliography  Save this article

Why and how did Israel adopt activity-based hospital payment? The Procedure-Related Group incremental reform

Author

Listed:
  • Brammli-Greenberg, Shuli
  • Waitzberg, Ruth
  • Perman, Vadim
  • Gamzu, Ronni

Abstract

Historically, Israel paid its non-profit hospitals on a perdiem (PD) basis. Recently, like other OECD countries, Israel has moved to activity-based payments. While most countries have adopted a diagnostic related group (DRG) payment system, Israel has chosen a Procedure-Related Group (PRG) system. This differs from the DRG system because it classifies patients by procedure rather than diagnosis. In Israel, the PRG system was found to be more feasible given the lack of data and information needed in the DRG classification system. The Ministry of Health (MoH) chose a payment scheme that depends only on inhouse creation of PRG codes and costing, thus avoiding dependence on hospital data. The PRG tariffs are priced by a joint Health and Finance Ministry commission and updated periodically. Moreover, PRGs are believed to achieve the same main efficiency objectives as DRGs: increasing the volume of activity, shortening unnecessary hospitalization days, and reducing the gaps between the costs and prices of activities. The PRG system is being adopted through an incremental reform that started in 2002 and was accelerated in 2010. The Israeli MoH involved the main players in the hospital market in the consolidation of this potentially controversial reform in order to avoid opposition. The reform was implemented incrementally in order to preserve the balance of resource allocation and overall expenditures of the system, thus becoming budget neutral. Yet, as long as gaps remain between marginal costs and prices of procedures, PRGs will not attain all their objectives. Moreover, it is still crucial to refine PRG rates to reflect the severity of cases, in order to tackle incentives for selection of patients within each procedure.

Suggested Citation

  • Brammli-Greenberg, Shuli & Waitzberg, Ruth & Perman, Vadim & Gamzu, Ronni, 2016. "Why and how did Israel adopt activity-based hospital payment? The Procedure-Related Group incremental reform," Health Policy, Elsevier, vol. 120(10), pages 1171-1176.
  • Handle: RePEc:eee:hepoli:v:120:y:2016:i:10:p:1171-1176
    DOI: 10.1016/j.healthpol.2016.08.008
    as

    Download full text from publisher

    File URL: http://www.sciencedirect.com/science/article/pii/S0168851016302135
    Download Restriction: Full text for ScienceDirect subscribers only

    As the access to this document is restricted, you may want to search for a different version of it.

    References listed on IDEAS

    as
    1. O'Reilly, Jacqueline & Busse, Reinhard & Häkkinen, Unto & Or, Zeynep & Street, Andrew & Wiley, Miriam, 2012. "Paying for hospital care: the experience with implementing activity-based funding in five European countries," Health Economics, Policy and Law, Cambridge University Press, vol. 7(01), pages 73-101, January.
    2. Van de ven, Wynand P.M.M. & Ellis, Randall P., 2000. "Risk adjustment in competitive health plan markets," Handbook of Health Economics,in: A. J. Culyer & J. P. Newhouse (ed.), Handbook of Health Economics, edition 1, volume 1, chapter 14, pages 755-845 Elsevier.
    3. Conrad Kobel & Josselin Thuilliez & Martine Bellanger & Karl-Peter Pfeiffer, 2011. "DRG systems and similar patient classification systems in Europe," Université Paris1 Panthéon-Sorbonne (Post-Print and Working Papers) halshs-00643049, HAL.
    Full references (including those not matched with items on IDEAS)

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:eee:hepoli:v:120:y:2016:i:10:p:1171-1176. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Dana Niculescu) or (). General contact details of provider: http://www.elsevier.com/locate/healthpol .

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.