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Reimbursement Schemes for Hospitals: The Impact of Case and Firm Characteristics


  • Wohlschlegel, Ansgar
  • Feess, Eberhard
  • Mueller, Helge


We use data from a German health insurer to study how the impact of switching from a fee for service system (FFS) to a high powered incentive scheme (prospective payment system; PPS) depends on the characteristics of patients and hospitals. As hospitals had a transition period of several years to complete the switch, we can adopt a difference-in-differences approach by adding hospital fixed effects and a time trend. Our results support hypotheses drawn from an incentive and selection perspective: PPS reduces the length of stay of older relative to younger patients, of more severe relative to less severe cases, and in smaller relative to larger hospitals. Hospitals which adopted PPS earlier provide higher quality under PPS as proxied by the case-specific readmission rate.

Suggested Citation

  • Wohlschlegel, Ansgar & Feess, Eberhard & Mueller, Helge, 2017. "Reimbursement Schemes for Hospitals: The Impact of Case and Firm Characteristics," Annual Conference 2016 (Augsburg): Demographic Change 145776, Verein für Socialpolitik / German Economic Association.
  • Handle: RePEc:zbw:vfsc16:145776

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    References listed on IDEAS

    1. Cheng, Shou-Hsia & Chen, Chi-Chen & Tsai, Shu-Ling, 2012. "The impacts of DRG-based payments on health care provider behaviors under a universal coverage system: A population-based study," Health Policy, Elsevier, vol. 107(2), pages 202-208.
    2. repec:aph:ajpbhl:1988:78:6:680-682_4 is not listed on IDEAS
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    6. Jiale Zhang, 2010. "The impact of a diagnosis-related group-based prospective payment experiment: the experience of Shanghai," Applied Economics Letters, Taylor & Francis Journals, vol. 17(18), pages 1797-1803.
    7. Cutler, David M, 1995. "The Incidence of Adverse Medical Outcomes under Prospective Payment," Econometrica, Econometric Society, vol. 63(1), pages 29-50, January.
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    9. Crew, Michael A & Kleindorfer, Paul R, 2002. "Regulatory Economics: Twenty Years of Progress?," Journal of Regulatory Economics, Springer, vol. 21(1), pages 5-22, January.
    10. Hamada, Hironori & Sekimoto, Miho & Imanaka, Yuichi, 2012. "Effects of the per diem prospective payment system with DRG-like grouping system (DPC/PDPS) on resource usage and healthcare quality in Japan," Health Policy, Elsevier, vol. 107(2), pages 194-201.
    11. Reinhard Busse & Jonas Schreyögg & Peter C. Smith, 2008. "Variability in healthcare treatment costs amongst nine EU countries - results from the Health BASKET project," Health Economics, John Wiley & Sons, Ltd., vol. 17(S1), pages 1-8.
    12. Tom Stargardt, 2008. "Health service costs in Europe: cost and reimbursement of primary hip replacement in nine countries," Health Economics, John Wiley & Sons, Ltd., vol. 17(S1), pages 9-20.
    13. Winnie Yip & Karen Eggleston, 2001. "Provider payment reform in China: the case of hospital reimbursement in Hainan province," Health Economics, John Wiley & Sons, Ltd., vol. 10(4), pages 325-339.
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    More about this item


    Hospital reimbursement; high-powered incentives; readmission; length of stay; difference-in-differences estimation;

    JEL classification:

    • I11 - Health, Education, and Welfare - - Health - - - Analysis of Health Care Markets
    • D22 - Microeconomics - - Production and Organizations - - - Firm Behavior: Empirical Analysis
    • I18 - Health, Education, and Welfare - - Health - - - Government Policy; Regulation; Public Health

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