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Are cost differences between specialist and general hospitals compensated by the prospective payment system?

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Listed:
  • Francesco Longo

    () (University of York
    University of York)

  • Luigi Siciliani

    (University of York
    University of York)

  • Andrew Street

    (London School of Economics and Political Science)

Abstract

Abstract Prospective payment systems fund hospitals based on a fixed-price regime that does not directly distinguish between specialist and general hospitals. We investigate whether current prospective payments in England compensate for differences in costs between specialist orthopaedic hospitals and trauma and orthopaedics departments in general hospitals. We employ reference cost data for a sample of hospitals providing services in the trauma and orthopaedics specialty. Our regression results suggest that specialist orthopaedic hospitals have on average 13% lower profit margins. Under the assumption of break-even for the average trauma and orthopaedics department, two of the three specialist orthopaedic hospitals appear to make a loss on their activity. The same holds true for 33% of departments in our sample. Patient age and severity are the main drivers of such differences.

Suggested Citation

  • Francesco Longo & Luigi Siciliani & Andrew Street, 2019. "Are cost differences between specialist and general hospitals compensated by the prospective payment system?," The European Journal of Health Economics, Springer;Deutsche Gesellschaft für Gesundheitsökonomie (DGGÖ), vol. 20(1), pages 7-26, February.
  • Handle: RePEc:spr:eujhec:v:20:y:2019:i:1:d:10.1007_s10198-017-0935-1
    DOI: 10.1007/s10198-017-0935-1
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    References listed on IDEAS

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    Keywords

    Specialist hospitals; Orthopaedics; Hospital costs; HRG; Tariff; Reference costs;

    JEL classification:

    • C21 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Cross-Sectional Models; Spatial Models; Treatment Effect Models
    • D24 - Microeconomics - - Production and Organizations - - - Production; Cost; Capital; Capital, Total Factor, and Multifactor Productivity; Capacity
    • H51 - Public Economics - - National Government Expenditures and Related Policies - - - Government Expenditures and Health
    • I18 - Health, Education, and Welfare - - Health - - - Government Policy; Regulation; Public Health

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