Does the Extent of Per-Case Payment System Affect Hospital Efficiency? Evidence from the Italian NHS

In the last few years there has been an increasing public pressure in many countries to contain costs in the healthcare sector, leading many national governments to introduce some form of prospective payment system and to reduce the scope for global budgeting. In this paper we investigate whether the different reimbursement systems adopted in the Italian hospital sector affect significantly providers’ efficiency. Because of the high variation both in the financing and in the provision of healthcare services among regions and hospitals, Italy represents an interesting case study to test the impact of different financing mechanisms on hospital’s performance. To this purpose, we carry out a two-stage Data Envelopment Analysis (DEA), where in the first-stage we estimate the DEA efficiency scores for all Italian hospitals and, then, in the second-stage, we regress the scores on different environmental variables, aiming to capture the role of different reimbursement systems. The results show a significant impact of the use of DRG-based PPS on hospital efficiency level. In particular, we find evidence that hospitals financed through PPS tend on average to be more efficient than those financed through global budget