Comparing the financial risk of bed-day and diagnosis related group based pricing types using parametric and simulation methods

Comparing the financial risk of bed-day and diagnosis related group based pricing types using parametric and simulation methods

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Article ID: iaor20042135
Country: Netherlands
Volume: 6
Issue: 2
Start Page Number: 67
End Page Number: 74
Publication Date: Jun 2003
Journal: Health Care Management Science
Authors: , , ,
Keywords: financial
Abstract:

The extent of random financial risk involved in the Finnish bed-day and Diagnosis Related Groups (DRG) based hospital pricing systems were estimated and compared using parametric and simulation methods. DRG based payment schemes were found to provide significantly better protection against financial risk for municipalities, but municipality's size was the main determinant of financial risk. Small municipalities should use longer contracts between hospitals or form bigger purchaser-organisations for risk pooling. In addition, the current risk management system proved to be ineffective in decreasing the random variation in total costs.

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