Optimizing payments based on efficiency, quality, complexity, and heterogeneity: the case of hospital funding

In several countries around the world, public hospitals are paid for by the health care services they provide to the population. Different funding systems are available, such as the Beveridge Model. Furthermore, payments can be either prospective, retrospective, or even a merging of both. Payments are usually nonoptimal in the Pareto sense and disregard the quality of delivered services as well as the environment (either internal or external) in which hospitals operate. This gap may introduce inefficiencies and inequities in the health care system, which currently faces scenarios of reduction/scarcity of resources. Furthermore, there are problems related to overpaying and misallocation of resources. Hence, payments should be optimized to guarantee an efficient allocation of resources to the health care systems. This study proposes a new best practice based tool, applying it to the Portuguese National Health Service. Considerable cost savings may emerge for inefficient hospitals if the model is successfully employed.