Cost of hospital care: effect of competition through quality.

Summary The aim of this paper is to study the heterogeneity of hospital costs for stays that are comparable in terms of pathology and procedures (Groupe homogène de séjours _GHS). At the time of the global budget, a strong heterogeneity of costs was observed between French public hospitals. What is the situation today? The activity-based pricing system (T2A) implemented between 2004 and 2008 has introduced competition between French hospitals, whether they are public, private, non-profit or for-profit. With the T2A, hospitals are now paid on a lump sum per stay basis. In theory, a fixed-price system should lead hospitals to minimize their costs in order to earn the difference between the fixed price and the cost. The introduction of competition between hospitals should accelerate this cost minimization mechanism. We show that, despite major changes in the modes of regulation, flat rates by GHM do not capture all the heterogeneity between hospitals or the entire patient case-mix.