Modern methods of hospital funding, competition and financial incentives

The various mechanisms of payment for health services aim to create incentives which affect the health provider behavior, economic efficiency and productivity of a health system, and ultimately its quality. This paper describes and analyzes the current methods of funding used in hospital systems worldwide, from the "diagnosis related groups" (DRGs) method to the recent development of hospital-based "pay for performance" (P4P) of the US Medicare system and the "payment by results" of the UK. Emphasis is placed on studies measuring hospital efficiency before and after adoption of the new methods of payment. The necessary institutional reforms are described which enhance competition between the health care funding schemes, such as social security funds and insurance companies, and the health care providers, such as hospitals. The Greek case is evaluated from the beginning of the economic crisis in 2009 until the present, with the establishment of a single health insurance fund, EOP.Y, the creation of the database esy. net for the collection of complete, reliable data on the costing and operation of the state hospitals (ESY) in order to monitor their financial and administrative functioning, and the adoption of the payment method of KEN-DRGs, where classification was made in 760 groups based on the initial diagnosis and treatment process. Finally, several changes are proposed which would lead towards a more sophisticated payment system based on performance criteria, including quality.