Governing hospital behaviour in the Italian National Health Service: the role of DRG-based payment systems

Background. Italy, similar to other countries in continental Europe, is flooded by the wave of New Public Management. Among the most affected sectors, healthcare plays a crucial role: the †œaziendalizzazione†� of healthcare sector might be interpreted as an NPM-inspired reform. In the INHS (Italian National Health Service) the decentralization, the introduction of quasi markets in addition to the managerialism have enlarged the relevance of hospitals funding systems which increasingly rely upon DRGs. DRG-based payment systems have been deeply discussed by international scholars. However, the effect of change or adjustment in DRG-tariff on provider behaviour are still unknown. Objectives and methods. The research aims at investigating if and how changes of DRG-tariffs impact provider behaviour. The case of one Italian region (Lombardy) is analyzed over a 4-years period (2002-2006). Data from all public and all private accredited hospitals based on extraction from discharge reports are collected and elaborated in order to investigate the relation between change in tariffs (2002-2003) and change in admissions or in the average length of stay (2002-2006) for four production lines: Cardiology surgical, Cardiology medical, Orthopaedy surgical, Orthopaedy medical. Quantitative analysis is performed per production line per hospital and comparative analysis across production lines are elaborated to grasp the general trends. Results. Findings show that hospitals seem not to respond directly and uniformly to change in tariffs: the change in admissions is not significantly correlated to the change in tariff. In addition hospitals do not behave similarly across production lines. When examining public and private behaviour, it emerges that they are rather similar on the general trend but they differ on the size of change in admissions. Conclusions. DRG-based tariff is a powerful tool to reimburse hospital activity but its effect onto hospital volumes appears to be unproved thus further investigations are required. Empirical future research should focus on understanding if and how hospital behaviour is responsive to changes in payments including in the analysis also the other tools the region could use to steer providers behaviour (i.e the throughput, Day Hospital change in volumes, extra-tariff reimbursement).