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How do Hospitals Respond to Price Changes? Evidence from Norway

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  • Jurgita Januleviciute
  • Jan Erik Askildsen
  • Oddvar Kaarboe
  • Luigi Siciliani
  • Matt Sutton

Abstract

Many publicly funded health systems use activity‐based financing to increase hospital production and efficiency. The aim of this study is to investigate whether price changes for different treatments affect the number of patients treated and the mix of activity provided by hospitals. We exploit the variations in prices created by the changes in the national average treatment cost per diagnosis‐related group (DRG) offered to Norwegian hospitals over a period of 5 years (2003–2007). We use the data from Norwegian Patient Register, containing individual‐level information on age, gender, type of treatment, diagnosis, number of co‐morbidities and the national average treatment costs per DRG. We employ fixed‐effect models to examine the changes in the number of patients treated within the DRGs over time. The results suggest that a 10% increase in price leads to about 0.8–1.3% increase in the number of patients treated for DRGs, which are medical (for both emergency and elective patients). In contrast, we find no price effect for DRGs that are surgical (for both emergency and elective patients). Moreover, we find evidence of upcoding. A 10% increase in the ratio of prices between patients with and without complications increases the proportion of patients coded with complications by 0.3–0.4 percentage points. Copyright © 2015 John Wiley & Sons, Ltd.

Suggested Citation

  • Jurgita Januleviciute & Jan Erik Askildsen & Oddvar Kaarboe & Luigi Siciliani & Matt Sutton, 2016. "How do Hospitals Respond to Price Changes? Evidence from Norway," Health Economics, John Wiley & Sons, Ltd., vol. 25(5), pages 620-636, May.
  • Handle: RePEc:wly:hlthec:v:25:y:2016:i:5:p:620-636
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    References listed on IDEAS

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    1. Elin Johanna Gudrun Hafsteinsdottir & Luigi Siciliani, 2010. "DRG prospective payment systems: refine or not refine?," Health Economics, John Wiley & Sons, Ltd., vol. 19(10), pages 1226-1239.
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    Cited by:

    1. Rossella Verzulli & Gianluca Fiorentini & Matteo Lippi Bruni & Cristina Ugolini, 2017. "Price Changes in Regulated Healthcare Markets: Do Public Hospitals Respond and How?," Health Economics, John Wiley & Sons, Ltd., vol. 26(11), pages 1429-1446, November.
    2. Reif, S.; Wichert, S.; Wuppermann, A.;, 2017. "Is it good to be too light? Birth weight thresholds in hospital reimbursement systems," Health, Econometrics and Data Group (HEDG) Working Papers 17/15, HEDG, c/o Department of Economics, University of York.
    3. Hennig-Schmidt, Heike & Jürges, Hendrik & Wiesen, Daniel, 2018. "Dishonesty in healthcare practice: A behavioral experiment on upcoding in neonatology," HERO On line Working Paper Series 2018:3, Oslo University, Health Economics Research Programme.
    4. repec:kap:ijhcfe:v:17:y:2017:i:1:d:10.1007_s10754-016-9201-9 is not listed on IDEAS

    More about this item

    JEL classification:

    • H42 - Public Economics - - Publicly Provided Goods - - - Publicly Provided Private Goods
    • I11 - Health, Education, and Welfare - - Health - - - Analysis of Health Care Markets

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