IREF - Institute for Research in Economic and Fiscal issues
Fiscal competition and economic freedom
WP 2018-06. Executive Summary.
The diffusion of the welfare state has produced a widespread involvement of the public sector in financing the supply of private goods for paternalistic reasons. The parallel process of devolution has meant that decisions on expenditure and service organisation have often been assigned to local Governments tiers. In Italy, this has produced 21 separate health care systems responsible for funding, organizing and delivering health care services. The objective of the present paper it to investigate the consequences of fiscal federalism and patients’ mobility on hospital competition using data for the Lombardy Region, which in Italy has adopted a competition model for hospital care, where public and private hospitals coexist and patients can choose their preferred provider.
In particular, we examine the effects of fiscal federalism on hospital competition by answering three unexplored research questions:
We use longitudinal data on 4,902,225 hospital discharges in the period 2010-2014 in private and public hospitals in Lombardy (Italy). We study the effects of decentralization at the hospital level by analysing patient mobility and by comparing the quality offered to patients living in Lombardy with that offered to patients living in other Italian regions (excluding border regions). The measures we use to proxy quality are waiting times, length of stay and reimbursement cost. For regional patients, we also consider 30-days mortality and hospital readmissions.
The empirical results suggest that even after controlling for hospital fixed effects, patients’ demographic and health characteristics, extra-regional patients wait less compared to regional ones, stay longer in hospital and are associated with higher reimbursement costs. In spite of this, exporting hospital services to other regions seem to benefit the quality of care provided to regional patients. Private and public hospitals with a high proportion of extra-regional patients show a lower mortality and are associated with lower reimbursement costs. These results seem to suggest that competition in the market for hospital care works because of the spillover effects that the market for extra-regional patients produces.
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