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New evidence on supplier-induced demand in China’s public tertiary hospitals: is the cost of hospitalization higher in the off-season?

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Abstract

Supplier-induced demand (SID) is a long-standing concern in health economics and health system studies; however, empirical evidence on SID—critical to the development of health policy—is difficult to obtain, especially from China. This study, therefore, aims to add new evidence on SID in China’s public tertiary hospitals and facilitates the development of evidence-based health policies in China and other countries with similar healthcare systems. For this study, we used patient-level electronic medical records (EMRs) collected from the information systems of tertiary hospitals in a western province in China. From 11 tertiary hospitals, we collected 274,811 hospitalization records dated between 15 February and 30 November 2019. Total expenditure on hospitalization and length of admission of each patient were the primary metrics for measuring SID. We constructed a character indicator to measure the high-season or off-season status of hospitals, and log-linear estimations were applied to estimate the “off-season effect” on hospitalized expenditures and length of admission. We find that the cost of hospitalization is indeed higher in the off-season in China’s public tertiary hospitals; specifically, expenditures for patients admitted in the off-season increased by an average of 5.3–7.9% compared to patients admitted in the peak season, while the length of admission in the hospital increased by an average of 6.8% to 10.2%. We also checked the robustness of our findings by performing subgroup analyses of EMRs in the city-level hospitals and surgical group. We name this phenomenon the “hospital off-season effect” and suggest that the main reason for it is inappropriate financial incentives combined with a Fee-For-Services payment method. We suggest that China should work to reform inappropriate financial incentives in public hospitals to eliminate SID by changing its payment and financing compensation system.

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Data availability

The data used in this study originates from the Health Information Center of X Province. Restrictions on the availability of this data and therefore it is not publicly available, it is available from the corresponding authors on reasonable request.

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Acknowledgements

We thank the National Natural Science Foundation of China, National Social Science Foundation of China and Health Commission of Shaanxi Province for providing fund and support.

Funding

This research was funded by National Natural Science Foundation of China (72104195), Major Project of National Social Science Foundation of China (20&ZD121), China Postdoctoral Science Foundation (2021M702577).

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Author notes

  1. Chi Shen and Qiwei Deng contributed equally in this study.

Authors and Affiliations

  1. School of Public Policy and Administration, Xi’an Jiaotong University, Xi’an, 710049, China

    Chi Shen, Sha Lai, Dantong Zhao & Zhongliang Zhou

  2. School of Public Health, Health Science Center, Xi’an Jiaotong University, Xi’an, 710061, China

    Qiwei Deng & Yaxin Zhao

  3. Center of Health Information of Shaanxi Province, Xi’an, 710003, China

    Liu Yang

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  1. Chi Shen
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Contributions

C.S., S.L., and ZL.Z. designed the research and approved the final version; C.S. and QW.D. performed research, conducted the analysis, and drafted the paper; QW.D. provided assistance and suggestions for analysis and revision; all authors wrote and edited the paper.

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Correspondence to Chi Shen, Sha Lai or Zhongliang Zhou.

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Shen, C., Deng, Q., Lai, S. et al. New evidence on supplier-induced demand in China’s public tertiary hospitals: is the cost of hospitalization higher in the off-season?. Eur J Health Econ (2023). https://doi.org/10.1007/s10198-023-01638-y

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