Hospital Financing regulation: “yardstick competition” in Chilean Public Hospitals

Abstract

Public hospital financing requires appropriate incentives in order to improve efficiency in resources allocation. The payment mechanisms currently in place present serious deficiencies in the provision of health as regards cost containment; they also require a new regulation as they represent a risk of financial imbalance. We present a model of competition based on comparison, or yardstick competition intended improve efficiency in the model is based on hospital current structure and activities, measured through DRGs. As a result, the model provides incentives for a better allocation of resources within the hospital, in a wider context related to population based resource allocation to the Health Authorities, of which hospitals are a part.