Has DRG payment influenced the technical efficiency and productivity of diagnostic technologies in Portuguese public hospitals? An empirical analysis using parametric and non‐parametric methods

Sena, Vania and Dismuke, Clara E. (1999). Has DRG payment influenced the technical efficiency and productivity of diagnostic technologies in Portuguese public hospitals? An empirical analysis using parametric and non‐parametric methods. Health Care Management Science, 2 (2), pp. 107-116.

Abstract

The use of Diagnosis Related Groups (DRG) as a mechanism for hospital financing is a currently debated topic in Portugal. The DRG system was scheduled to be initiated by the Health Ministry of Portugal on January 1, 1990 as an instrument for the allocation of public hospital budgets funded by the National Health Service (NHS), and as a method of payment for other third party payers (e.g., Public Employees (ADSE), private insurers, etc.). Based on experience from other countries such as the United States, it was expected that implementation of this system would result in more efficient hospital resource utilisation and a more equitable distribution of hospital budgets. However, in order to minimise the potentially adverse financial impact on hospitals, the Portuguese Health Ministry decided to gradually phase in the use of the DRG system for budget allocation by using blended hospitalspecific and national DRG casemix rates. Since implementation in 1990, the percentage of each hospitals budget based on hospital specific costs was to decrease, while the percentage based on DRG casemix was to increase. This was scheduled to continue until 1995 when the plan called for allocating yearly budgets on a 50% national and 50% hospitalspecific cost basis. While all other nonNHS third party payers are currently paying based on DRGs, the adoption of DRG casemix as a National Health Service budget setting tool has been slower than anticipated. There is now some argument in both the political and academic communities as to the appropriateness of DRGs as a budget setting criterion as well as to their impact on hospital efficiency in Portugal. This paper uses a twostage procedure to assess the impact of actual DRG payment on the productivity (through its components, i.e., technological change and technical efficiency change) of diagnostic technology in Portuguese hospitals during the years 1992–1994, using both parametric and nonparametric frontier models. We find evidence that the DRG payment system does appear to have had a positive impact on productivity and technical efficiency of some commonly employed diagnostic technologies in Portugal during this time span.

Publication DOI: https://doi.org/10.1023/A:1019027509833
Divisions: Aston Business School > Economics finance & entrepreneurship
Aston Business School
Uncontrolled Keywords: Diagnosis Related Groups,DRG,hospital financing,NHS,third party payers,United States,efficient hospital resource utilisation,equitable distribution,hospital budgets,adverse financial impact,hospitals,Portuguese Health Ministry,blended hospitalspecific,national DRG casemix rates
Full Text Link: http://www.springerlink.com/content/l803161364u7uj66/
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Published Date: 1999-06
Authors: Sena, Vania
Dismuke, Clara E.

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