DRGs: the link between investment in technologies and appropriateness

Rosella Levaggi, Michele Moretto and Paolo Pertile

No 31/2012, Working Papers from University of Verona, Department of Economics

Abstract: In this paper we investigate the relationship between the DRG system for hospital reimbursement and investment in technologies. We use a simple economic model where the reimbursement policy for treatments whose provision requires a sunk investment cost has an impact on both the decision whether to adopt the technology and many patients to treat with it. The optimal pricing policy involves a two-part tariff: a price equal to the marginal cost of the patient whose benefit of treatment equals the cost of provision, and a separate payment for the partial reimbursement of capital costs. Departures from this scheme, which are frequent in DRG tariff systems designed around the world, lead to a trade-off between the objective of making effective technologies available to patients and the need to ensure appropriateness in use.

Keywords: DRG; prospective payment; appropriateness; capital cost; health care investment (search for similar items in EconPapers)
JEL-codes: I18 (search for similar items in EconPapers)
Pages: 15
Date: 2012-11
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Citations: View citations in EconPapers (1)

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