Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/285151 
Year of Publication: 
2019
Citation: 
[Journal:] Health Economics Review [ISSN:] 2191-1991 [Volume:] 9 [Issue:] 38 [Year:] 2019 [Pages:] 1-14
Publisher: 
Springer, Heidelberg
Abstract: 
Background: With DRG payments, hospitals can game the system by 'upcoding' true patient's severity of illness. This paper takes into account that upcoding can be performed by the chief physician and hospital management, with the extent of the distortion depending on hospital's internal decision-making process. The internal decision making can be of the principal-agent type with the management as the principal and the chief physician as the agent, but the chief physicians may be able to engage in negotiations with management resulting in a bargaining solution. Results: In case of the principal-agent mechanism, the distortion due to upcoding is shown to accumulate, whereas in the bargaining case it is avoided at the level of the chief physician. Conclusion: In the presence of upcoding it may be appropriate for the sponsor to design a payment system that fosters bargaining to avoid additional distortions even if this requires extra funding.
Subjects: 
Hospital organziation
Upcoding
Hierarchical principal-agent model
Nash bargaining model
Distribution of power
Persistent Identifier of the first edition: 
Creative Commons License: 
cc-by Logo
Document Type: 
Article

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