Optimizing payments based on efficiency, quality, complexity, and heterogeneity: the case of hospital funding

Abstract

In several countries around the world, public hospitals are paid for by the health care services they provide to the population. Different funding systems are available, such as the Beveridge Model. Furthermore, payments can be either prospective, retrospective, or even a merging of both. Payments are usually nonoptimal in the Pareto sense and disregard the quality of delivered services as well as the environment (either internal or external) in which hospitals operate. This gap may introduce inefficiencies and inequities in the health care system, which currently faces scenarios of reduction/scarcity of resources. Furthermore, there are problems related to overpaying and misallocation of resources. Hence, payments should be optimized to guarantee an efficient allocation of resources to the health care systems. This study proposes a new best practice based tool, applying it to the Portuguese National Health Service. Considerable cost savings may emerge for inefficient hospitals if the model is successfully employed.

Economic Analysis of Portuguese Public Hospitals Through the Construction of Quality, Efficiency, Access, and Financial Related Composite Indicators

“…They should be enough to explain hospital performance. In this way, we analyzed the correlation between variables to verify the association between them and redundancy (Ferreira et al 2019 ). We removed some variables exhibiting high correlation and causal relationships.…”

“…Following Ferreira et al ( 2019 ), we classified quality variables into two major groups: (a) care appropriateness and (b) clinical safety. Clinical safety includes indicators assessing entities' ability to prevent complications in health care.…”

“…Clinical safety includes indicators assessing entities' ability to prevent complications in health care. In contrast, the ability to provide adequate, evidence-based health care constitutes the other group of quality indicators (Ferreira et al 2019 ).…”

“…This price can be computed using different ways, but, in general, it follows the minimum unitary cost observed for a given group of hospitals. Ferreira et al ( 2019 ) suggested that payments should be based on performance because unitary prices should be computed using efficient costs. In this case, the efficiency would result from a benchmarking exercise with appropriate adjustment for the operational environment, quality, and access.…”

What drives the healthcare sector's economic impact? Evidence from European countries

“…Cheng et al (2018) found that single-payer systems are administratively more efficient and more effective in controlling costs as compared to multi-payer systems. Ferreira et al (2019) examined various payment systems for hospitals and argue that payments should be optimized to guarantee an efficient allocation of resources.…”