Price Changes in Regulated Healthcare Markets: Do Public Hospitals Respond and How?

Quaderni - Working Paper DSE N° 1041

31 Pages Posted: 11 Dec 2015

See all articles by Rossella Verzulli

Rossella Verzulli

University of Bologna - Department of Economics

Gianluca Fiorentini

University of Bologna - Department of Economics

Matteo Lippi Bruni

University of Bologna - Department of Economics

Cristina Ugolini

University of Bologna - Department of Economics

Date Written: December 4, 2015

Abstract

This paper examines the behaviour of public hospitals in response to the average payment incentives created by price changes for patients classified in different Diagnosis Related Groups (DRGs). Using panel data on public hospitals located within the Italian region of Emilia-Romagna, we test whether a one-year increase in DRG prices induced public hospitals to increase their volume of activity, and whether a potential response is associated with changes in waiting times and/or length of stay. We find that public hospitals reacted to the policy change by increasing the number of patients with surgical treatments. This effect was smaller in the two years after the policy change than in later years, and for providers with a lower excess capacity in the pre-policy period, whereas it did not vary significantly across hospitals according to their degree of financial and administrative autonomy. For patients with medical DRGs, instead, there appeared to be no effect on inpatient volumes. Our estimates also suggest that an increase in DRG prices either decreased or had no impact on the proportion of patients waiting more than six months. Finally, we find no evidence of a significant effect on patients’ average length of stay.

Keywords: DRG prices, average payment incentives, hospital behaviour

JEL Classification: I11, I12, I18

Suggested Citation

Verzulli, Rossella and Fiorentini, Gianluca and Lippi Bruni, Matteo and Ugolini, Cristina, Price Changes in Regulated Healthcare Markets: Do Public Hospitals Respond and How? (December 4, 2015). Quaderni - Working Paper DSE N° 1041. Available at SSRN: https://ssrn.com/abstract=2701733 or http://dx.doi.org/10.2139/ssrn.2701733

Rossella Verzulli (Contact Author)

University of Bologna - Department of Economics ( email )

Strada Maggiore 45
Bologna, 40125
Italy

Gianluca Fiorentini

University of Bologna - Department of Economics ( email )

Strada Maggiore 45
Bologna, 40125
Italy

Matteo Lippi Bruni

University of Bologna - Department of Economics ( email )

Piazza Scaravilli, 2
40126 Bologna, 40126
Italy

Cristina Ugolini

University of Bologna - Department of Economics ( email )

Piazza Scaravilli 2
Bologna, 40126
Italy

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