An analysis of a rural hospital's investment decision under different payment systems.
externality
healthcare payment system
hospitals' investment
rural hospitals
the ratchet effect
Journal
Health economics
ISSN: 1099-1050
Titre abrégé: Health Econ
Pays: England
ID NLM: 9306780
Informations de publication
Date de publication:
28 Dec 2023
28 Dec 2023
Historique:
revised:
11
10
2023
received:
24
01
2023
accepted:
13
10
2023
medline:
29
12
2023
pubmed:
29
12
2023
entrez:
29
12
2023
Statut:
aheadofprint
Résumé
From an economic perspective, large investments in medical equipment are justifiable only when many patients benefit. Although rural hospitals play a crucial role locally, the treatments they can offer are limited. In this study, I characterize investment level that maximizes the total surplus, encompassing patients' welfare and producer surplus, and subtracting treatment costs. Specifically, I account for economic externalities generated by the investment in the rural hospital and for different utility losses that patients suffer when they cannot be treated locally. I demonstrate that the optimal investment level can be implemented if the Health Authority has the power to set specific prices for each disease. Additionally, I explore a decentralized situation wherein the investment decision lies with the rural hospital manager, and the Health Authority can only make a discrete decision between two payment systems: Fee-for-service, which covers all treatment costs, or Diagnosis-Related-Groups, which reimburses a price per patient based on the overall average cost. I find that the Diagnosis-Related-Groups system outperforms the Fee-for-service in terms of total surplus when the treatment cost at the rural hospital is lower. However, when the rural hospital has higher costs and the Health Authority seeks to incentivize investment, the Fee-for-service system is superior.
Types de publication
Journal Article
Langues
eng
Sous-ensembles de citation
IM
Subventions
Organisme : Southeast University
ID : Young Scholars Funding Program
Organisme : University College Dublin
ID : PhD Scholarship of UCD School of Economics
Informations de copyright
© 2023 John Wiley & Sons Ltd.
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