Abstract
Payment systems (PS) are at the core of the intermediation function between payers and recipients of care, which is complex because of the lack of functioning true markets in healthcare, and where the final outcome is significantly disconnected from what is paid for. There is a major distinction between retrospective and prospective PS. Incentives vary in complex ways, and correspondingly with complex results, between line-item budgets, per diem, global budgets, capitation, diagnosis-related groups, fee-for-service, and pay-for-performance. There are often trade-offs between providing incentives for enhancing quality and containing costs, risk selection and efficiency, creating producer surplus and inducing supply, and governance control and flexibility. Quality top-ups look like a promising route in systems which are neither fully prospective nor retrospective, and which relate to the business model employed.
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Notes
- 1.
Note that health financing includes both the alternative ways to gather the funding for health services, by collecting and pooling resources for health, and the criteria for distributing resources across purchasers and providers.
- 2.
Presently, DRG codes are based on the 11th revision of the International Classification of Diseases.
- 3.
Several models in the literature have analysed the problem of finding the PS able to “optimally” balance the provider’s (the agent’s) cost reducing and quality enhancing efforts, in the context of a “hidden action” or “(supply side) moral hazard” principal-agent model. The authors of these models include the following: Ellis and McGuire (1986), Ellis and McGuire (1990), Allen and Gentler (1991), Holmstrom and Milgrom (1990), Glazer and McGuire (1994), Hodgkin and McGuire (1994), Ma (1994), Rogerson (1994), Chalkley and Malcomson (1995, 1998), and Ma and McGuire (1997). They have achieved different degrees of success.
- 4.
It can be argued that, when the size of the population served is known, there is little or no difference between capitation and block budgeting.
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Belli, P., Jeurissen, P. (2020). Hospital Payment Systems. In: Durán, A., Wright, S. (eds) Understanding Hospitals in Changing Health Systems. Palgrave Macmillan, Cham. https://doi.org/10.1007/978-3-030-28172-4_6
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