Using fees to reduce bed-blocking: A game between hospitals and care providers

In 2012, a health reform (the Coordination Reform) was introduced in Norway with an aim to change the incentives of the agents in the health sector to consider the consequences of their actions on other institutions. We study one of the policy measures in the reform, namely the introduction of a fee for bed-blocking in hospitals accompanied by budget transfers from hospitals to municipalities (care institutions). We do this by first introducing a Stackelberg game where the hospital is the leader and the care institution is the follower. The hospital decides the discharge date, taking into account the reactions of the care institution. The model shows that the reform does not necessarily lead to less bed-blocking as this depends on the relative strength of the players’ concern for income and patients’ health. While a tax gives an incentive to reduce bed-blocking, the effect also depends on the change in the discharge health level. A reasonable outcome is that discharge time goes down, but this may again give an incentive for the care institution to let the patient stay longer at the hospital if it has a positive health effect. This may partly outweigh the effect of the tax. We test the analytical results with data, and find that the reform had a large effect in terms of reducing bed-blocking, and that the effect of the fee becomes significantly larger when we consider the hospitals’ strategic behaviour in reducing the discharge time and increasing the number of patients that were reported to be ready for discharge. The interpretations of this may be that the financial incentives count more than the health incentives, or that the health effects of bed-blocking are insignificant.