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Gerdtham U, Löthgren M,Tambour M & Rehnberg C, (1999)
‘Internal markets and efficiency in health care: a multiple output
stochastic frontier analysis’
Health Economics, 8: 151-164.
- Tests for the existence and magnitude of an effect of new reimbursement
schemes on technical efficiency in Swedish health care.
- A stochastic
frontier model is proposed and then empirically estimated.
- The Swedish healthcare system is financed and delivered by 26 County
Councils which are politically, economically and administratively ‘independent’.
- Between 1991 and 1995, five of these Councils implemented a system
of internal markets characterised by a purchaser/provider split and output-related
(‘DRG’-type) reimbursement of providers.
- The authors test whether
implementing output-based reimbursement affects technical efficiency.
Key results:
- Introducing output-based reimbursement was found to improve technical
efficiency by 9.7% on average.
- The hypothesis of constant returns
to scale in the health care production function could not be rejected.
- This implies a potential average cost saving of 9.7% as a result of
a switch from budget-based to output-based reimbursement.
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