The Effects of New Public Management: Activity-based Reimbursement and Efficiency in the Scandinavian Hospital Sectors

Abstract

Activity-based reimbursement (ABR) is a key element in the New Public Management reform programme. In recent decades ABR has replaced or supplemented frame-based reimbursement (FRB) in the Scandinavian hospital sectors, and political decision makers have widely believed that ABR would improve efficiency. This article systematically describes and compares 12 studies and their results to determine whether research supports this belief. The article has two main conclusions. First, existing research provides a much more blurry picture than envisaged by decision makers. Studies with positive and non-positive results are approximately equal in number, even when the quality of research designs is taken into account. Second, it is quite likely that the blurry picture is caused mainly by the low credibility of the new ABR schemes, which has undermined the incentives for greater efficiency that the new schemes should provide. The issue of credibility is not tested in existing research and is thus a particularly promising avenue for future research into the effects of economic steering tools like ABR.