"Effects of tariff differentials on cesarean sections in Italy"

The purpose of this paper is to examine the impact of tariff differentials on cesarean delivery rates at the hospital level. The case of the Italian NHS seems to be especially interesting when considering the effects of financial incentives on providers’ behaviors. In fact, the Italian NHS was originally designed as a centralized system but decentralization processes have been progressively undertaken to increase the powers of Regional Health Authorities in both the financing and delivery of health care. Therefore, great variability exists in the way tariffs are used, as Regions have settled them in accordance with the characteristics of the health care providers. As for childbirths, in Italy, not only the rate of cesarean deliveries is much higher than that of other OECD countries, but also significant differences exist across regions. In this paper, we investigate the impact of DRG tariff differentials on hospital risk-adjusted cesarean rates for first-time mothers during the period 2009-11, after controlling for supply factors and a large set of fixed effects. Our main finding is that Italian hospitals respond to financial incentives in obstetrics and that the strategic behavioural response varies by hospital type and level of specialization.