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. 2019 Feb;20(1):7-26.
doi: 10.1007/s10198-017-0935-1. Epub 2017 Oct 23.

Are cost differences between specialist and general hospitals compensated by the prospective payment system?

Francesco Longo  1   2 , Luigi Siciliani  3   4 , Andrew Street  5
Affiliations

Are cost differences between specialist and general hospitals compensated by the prospective payment system?

Francesco Longo et al. Eur J Health Econ. 2019 Feb.

Abstract

Prospective payment systems fund hospitals based on a fixed-price regime that does not directly distinguish between specialist and general hospitals. We investigate whether current prospective payments in England compensate for differences in costs between specialist orthopaedic hospitals and trauma and orthopaedics departments in general hospitals. We employ reference cost data for a sample of hospitals providing services in the trauma and orthopaedics specialty. Our regression results suggest that specialist orthopaedic hospitals have on average 13% lower profit margins. Under the assumption of break-even for the average trauma and orthopaedics department, two of the three specialist orthopaedic hospitals appear to make a loss on their activity. The same holds true for 33% of departments in our sample. Patient age and severity are the main drivers of such differences.

Keywords: HRG; Hospital costs; Orthopaedics; Reference costs; Specialist hospitals; Tariff.

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Figures

Fig. 1
Fig. 1
Distribution of inlier and per diem unit costs in natural units and logs
Fig. 2
Fig. 2
Distribution of overall and inlier profit margins
Fig. 3
Fig. 3
Estimated salary function for consultants and associate specialists
See this image and copyright information in PMC

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