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Introducing activity-based financing: a review of experience in Australia, Denmark, Norway and Sweden

  • Andrew Street

    (Centre for Health Economics, University of York)

  • Kirsi Vitikainen
  • Afsaneh Bjorvatn
  • Anne Hvenegaard

We review and evaluate the international literature on activity-based funding of health services, focussing especially on experience in Australia (Victoria), Denmark, Norway and Sweden. In evaluating this literature we summarise the differences and pros and cons of three different funding arrangements, namely cost-based reimbursement, global budgeting and activity-based financing. The institutional structures of the four jurisdictions that are the main focus of the review are described, and an outline is provided about how activity-based funding has been introduced in each. We then turn to the mechanics of activity-based funding and discuss in detail how patients are classified, how prices are set and how other services are funded. Although concentrating on the four jurisdictions, we draw on wider international experience to inform this discussion. We review evidence of the impact of activity-based funding in the four jurisdictions on efficiency, activity rates, waiting times, quality and overall expenditure. Finally we conclude with a brief commentary of some of the challenges that would have to be faced if implementing activity-based funding.

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File URL: http://www.york.ac.uk/media/che/documents/papers/researchpapers/rp30_introducing_activity-based_financing.pdf
File Function: First version, 2007
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Paper provided by Centre for Health Economics, University of York in its series Working Papers with number 030cherp.

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Length: 52 pages
Date of creation: Oct 2007
Date of revision:
Handle: RePEc:chy:respap:30cherp
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  1. Street, Andrew & Duckett, Stephen, 1996. "Are waiting lists inevitable?," Health Policy, Elsevier, vol. 36(1), pages 1-15, April.
  2. Ellis, Randall P. & McGuire, Thomas G., 1986. "Provider behavior under prospective reimbursement : Cost sharing and supply," Journal of Health Economics, Elsevier, vol. 5(2), pages 129-151, June.
  3. David Epstein & Anne Mason, 2006. "Costs and prices for inpatient care in England: Mirror twins or distant cousins?," Health Care Management Science, Springer, vol. 9(3), pages 233-242, August.
  4. Keeler, Emmett B. & Carter, Grace M. & Trude, Sally, 1988. "Insurance aspects of DRG outlier payments," Journal of Health Economics, Elsevier, vol. 7(3), pages 193-214, September.
  5. Llewellyn, Sue & Northcott, Deryl, 2005. "The average hospital," Accounting, Organizations and Society, Elsevier, vol. 30(6), pages 555-583, August.
  6. A. Street & D. Dawson, 2002. "Costing hospital activity: the experience with healthcare resource groups in England," The European Journal of Health Economics, Springer, vol. 3(1), pages 3-9, March.
  7. Mikkola, Hennamari & Keskimaki, Ilmo & Hakkinen, Unto, 2002. "DRG-related prices applied in a public health care system--can Finland learn from Norway and Sweden?," Health Policy, Elsevier, vol. 59(1), pages 37-51, January.
  8. Marisa Miraldo & Maria Goddard & Peter C Smith, 2006. "The incentive effects of payment by results," Working Papers 019cherp, Centre for Health Economics, University of York.
  9. Jonas Schreyögg & Tom Stargardt & Oliver Tiemann & Reinhard Busse, 2006. "Methods to determine reimbursement rates for diagnosis related groups (DRG): A comparison of nine European countries," Health Care Management Science, Springer, vol. 9(3), pages 215-223, August.
  10. Anni Ankjær-Jensen & Pernille Rosling & Lone Bilde, 2006. "Variable prospective financing in the Danish hospital sector and the development of a Danish case-mix system," Health Care Management Science, Springer, vol. 9(3), pages 259-268, August.
  11. Jackson, Terri, 2001. "Using computerised patient-level costing data for setting DRG weights: the Victorian (Australia) cost weight studies," Health Policy, Elsevier, vol. 56(2), pages 149-163, May.
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