Abstract
Background: Currently there are various issues that exist in the medical institutions in China as a result of the price-setting in DRGs, which include the fact that medical institutions tend to choose patients and that the payment standard for complex cases cannot reasonably compensate the cost.Objective: The main objective is to prevent adverse selection problems in the operations of a diagnosis-related groups (DRGs) system with the game pricing model for scientific and reasonable pricing.Methods: The study proposes an improved bargaining game model over three stages, with the government and patients forming an alliance. The first stage assumes the alliance is the price maker in the Stackelberg game to maximize social welfare. Medical institutions are a price taker and decide the level of quality of medical service to maximize their revenue. A Stackelberg equilibrium solution is obtained. The second stage assumes medical institutions dominate the Stackelberg game and set an optimal service quality for maximizing their revenues. The alliance as the price taker decides the price to maximize the social welfare. Another Stackelberg equilibrium solution is achieved. The final stage establishes a Rubinstein bargaining game model to combine the Stackelberg equilibrium solutions in the first and second stage. A new equilibrium between the alliance and medical institutions is established.Results: The results show that if the price elasticity of demand increases, the ratio of cost compensation on medical institutions will increase, and the equilibrium price will increase. The equilibrium price is associated with the coefficient of patients' quality preference. The absolute risk aversion coefficient of patients affects government compensation and total social welfare.Conclusion: In a DRGs system, considering the demand elasticity and the quality preference of patients, medical service pricing can prevent an adverse selection problem. In the future, we plan to generalize these models to DRGs pricing systems with the effects of competition of medical institutions. In addition, we suggest considering the differential compensation for general hospitals and community hospitals in a DRGs system, in order to promote the goal of hierarchical diagnosis and treatment.
Highlights
The National Health Commission and the other relevant departments in China have started to test the diagnosisrelated groups (DRGs) system in 30 pilot locations since 2019
In the process of DRGs operation in many countries, especially in developing countries, such as India and China, unreasonable pricing and government compensation of medical services under the DRGs operation environment will lead to two major problems
On the one hand, underpricing will lead to medical institutions shirking the responsibility of critically ill patients and decomposing the DRGs category; on the other hand, overpricing will lead to a sharp increase in or even out of control medical expenses
Summary
The National Health Commission and the other relevant departments in China have started to test the diagnosisrelated groups (DRGs) system in 30 pilot locations since 2019. High price-setting in DRGs leads to the difficulty of the government controlling medical expenses, while low price-setting is not able to fairly compensate the costs in medical institutions [1], and even leads to hospitals refusing to accept patients in critical conditions. This conflict in pricesetting can be understood as a problem of adverse selection [4]. There are various issues that exist in the medical institutions in China as a result of the price-setting in DRGs, which include the fact that medical institutions tend to choose patients and that the payment standard for complex cases cannot reasonably compensate the cost
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