The effects of upcoding, cream skimming and readmissions on the Italian hospitals efficiency: A population-based investigation

In this paper we analyze the effects of some distortions induced by the prospective payment system, i.e. Upcoding, Cream Skimming and Readmissions, on hospitals' technical efficiency. We estimate a production function using a population--based dataset composed by all active hospitals in an Italian region during the period 1998--2007. We show that cream skimming and upcoding have a negative impact on hospitals' technical efficiency, while readmissions have a positive effect. Moreover, the results indicate that private hospitals engage more in cream skimming than public and not--for--profit ones, while we observe no ownership differences regarding upcoding. Not--for--profit hospitals have the highest readmission index. Last, not--for--profit and public hospitals have the same efficiency levels, while private hospitals have the lowest technical efficiency.