The Impact of a Cost-containment Measure on the Quality of Regional Health Services in Italy: a Parametric and a Non-parametric Approach

This paper provides novel evidence on the impact of a cost-containment measure first introduced in Italy in 2007 – Piani di Rientro sanitari (PdRs) – on the quality and efficiency of Regional Health Services (RHSs). Thus far, ten out of twenty-one RHSs have undergone at least one round of PdRs – three managed to exit, but seven are still treated – raising the question of whether cost reduction has had any unintended negative effect on the quality of treated RHSs. I answer this question using the Two-way Mundlak approach. Compared to the classic Two-way Fixed Effects, this method explicitly models the staggered nature of the policy by allowing me to analyze how the treatment effect varies along different dimensions. Further, it allows the estimation of the long-run impact of PdRs. Overall, I find that Piani di Rientro managed to reduce costs. However, cost reduction was not followed by a boost in the efficiency of RHSs and the appropriateness of care provided, as expected by the policymaker. Conversely, reduced budgets made available to regions only resulted in an unintended deterioration in the quality of healthcare services. Results also hold in the long run and are robust to a set of bounded-variations assumptions.