The Political Economy of Diagnosis-Related Groups

CERGE-EI Working Paper Series No. 592

41 Pages Posted: 22 Jun 2017

See all articles by Paola Bertoli

Paola Bertoli

University of Economics, Prague; Charles University in Prague - CERGE-EI, a joint workplace of Charles University and the Economics Institute of the Czech Academy of Sciences

Veronica Grembi

Sapienza University of Rome - Department of Earth Sciences and Forecasting Research Center, Prevention and Control of Geological Risks

Date Written: June 1, 2017

Abstract

We provide a political economy interpretation of the variations in the prices of 6 obstetric diagnosis-related groups (DRGs) using Italy as a case study. Italy provides a unique institutional setting since its 21 regional governments can decide to adopt the national DRG system or to adjust/waive it. Using a panel fixed effects model, we exploit the results of 66 electoral ballots between 2000 and 2013 to estimate how obstetric DRGs are affected by the composition and characteristics of regional governments. We find that the incidence of physicians among regional politicians explains variations in DRGs with low technological intensity, such as normal newborns, but not of those with high technological intensity, as severely premature newborns. We further investigate these results by exploiting the implementation of a budget constraint policy. Applying a difference-in-difference strategy, we observe a decrease in the average levels of DRGs after the implementation of the policy, but the magnitude of this decrease depends on the presence of physicians among politicians and the political alignment between the regional and the national government. Finally, we rely on patient data (6,500,000 infant deliveries) to assess whether any of the political economy variables have a positive impact on the quality of regional obstetric systems. We find no effect.

Keywords: Diagnosis-Related Groups, Regional Governments, Difference in Differences

JEL Classification: H51, H70, I1

Suggested Citation

Bertoli, Paola and Grembi, Veronica, The Political Economy of Diagnosis-Related Groups (June 1, 2017). CERGE-EI Working Paper Series No. 592, Available at SSRN: https://ssrn.com/abstract=2990773 or http://dx.doi.org/10.2139/ssrn.2990773

Paola Bertoli (Contact Author)

University of Economics, Prague ( email )

Prague
Czech Republic

Charles University in Prague - CERGE-EI, a joint workplace of Charles University and the Economics Institute of the Czech Academy of Sciences ( email )

Politickych veznu 7
Prague, 111 21
Czech Republic

Veronica Grembi

Sapienza University of Rome - Department of Earth Sciences and Forecasting Research Center, Prevention and Control of Geological Risks ( email )

Rome
Italy

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