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Swiss hospital financing with DRGs: Are there treatments/- combinations that are associated with profitability?

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  • Subelack, Jonas

Abstract

Objective: This study aims to investigate whether specific treatments or combinations of treatments are significantly associated with the profitability of Swiss acute-care hospitals under the current diagnosis-related group (S-DRG) reimbursement system, while accounting for differences between public and private institutions. Methods: A comprehensive panel dataset of 142 Swiss acute-care hospitals, spanning from 2015 to 2022, was utilized, combining detailed financial and clinical case-level data. Profitability was assessed through hospital-level net financial results excluding deficit-covering payments. All cases were assigned uniquely to a medically homogeneous service group or area, as determined by Swiss hospital capacity planning. Fixed-effects panel regression models analyzed the associations between service areas and profitability, while an Apriori association rule mining algorithm identified service group combinations associated with profitability. Results: From 2015 to 2022, overall hospital profitability margins declined continuously, with public hospitals consistently reporting lower profitability than private hospitals (net profitability margin: 0.75% vs. 1.61%), despite receiving substantial subsidies (CHF 67.1 million vs. CHF 4.1 million). The primary panel regression revealed that three service areas are significantly associated with hospital profitability: Ear, nose and throat (16,778 CHF; p﹤0.05), gynecology (27,456 CHF; p﹤0.01), and heart (10,725 CHF; p﹤0.01). The Apriori algorithm identified that the combination of the following service groups is most strongly linked to profitability: AUG1.2 (orbit, eyelids, tear ducts), BEW10 (plexus surgery), and GEF2 (interventional and endovascular vascular medicine; support: 0.051, confidence: 0.935, lift: 1.615). Conclusion: The analysis of hospital profitability based on the treatments and combinations of treatments performed indicates that the S-DRG reimbursement system is relatively fair. However, across all analyses, the heart service area is primarily associated with profitability, while the serious injury service area is mainly associated with losses. Therefore, minor adjustments to the S-DRG cost weights should be made to reduce this imbalance.

Suggested Citation

  • Subelack, Jonas, 2025. "Swiss hospital financing with DRGs: Are there treatments/- combinations that are associated with profitability?," Working Paper Series in Health Economics, Management and Policy 2025-02, University of St.Gallen, School of Medicine, Chair of Health Economics, Policy and Management.
    • Handle: RePEc:zbw:hsgmed:202502
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    File URL: https://www.econstor.eu/bitstream/10419/318261/1/wps-2025-02.pdf
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    References listed on IDEAS

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    1. James H. Stock & Mark W. Watson, 2008. "Heteroskedasticity-Robust Standard Errors for Fixed Effects Panel Data Regression," Econometrica, Econometric Society, vol. 76(1), pages 155-174, January.
    2. Widmer, Philippe K., 2016. "SwissDRG: Ein Vergütungssystem mit ungleichen finanziellen Risiken für die Spitäler?," Die Unternehmung - Swiss Journal of Business Research and Practice, Nomos Verlagsgesellschaft mbH & Co. KG, vol. 70(3), pages 210-226.
    3. Boes, Stefan & Napierala, Christoph, 2021. "Assessment of the introduction of DRG-based reimbursement in Switzerland: Evidence on the short-term effects on length of stay compliance in university hospitals," Health Policy, Elsevier, vol. 125(6), pages 739-750.
    4. Michael M Havranek & Josef Ondrej & Stella Bollmann & Philippe K Widmer & Simon Spika & Stefan Boes, 2022. "Identification and assessment of a comprehensive set of structural factors associated with hospital costs in Switzerland," PLOS ONE, Public Library of Science, vol. 17(2), pages 1-17, February.
    5. Tarun Mehra & Christian Thomas Benedikt Müller & Jörk Volbracht & Burkhardt Seifert & Rudolf Moos, 2015. "Predictors of High Profit and High Deficit Outliers under SwissDRG of a Tertiary Care Center," PLOS ONE, Public Library of Science, vol. 10(10), pages 1-18, October.
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    JEL classification:

    • H51 - Public Economics - - National Government Expenditures and Related Policies - - - Government Expenditures and Health
    • I11 - Health, Education, and Welfare - - Health - - - Analysis of Health Care Markets
    • I15 - Health, Education, and Welfare - - Health - - - Health and Economic Development
    • I18 - Health, Education, and Welfare - - Health - - - Government Policy; Regulation; Public Health
    • L51 - Industrial Organization - - Regulation and Industrial Policy - - - Economics of Regulation

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