The impact of hospital financing on the length of stay: Evidence from Austria

In 1997, Austria has changed the hospital financing system from a per diem-based payment scheme to a per case-based one. This paper assesses whether this reform has influenced the hospital length of stay. Empirically, we use data for 20 diagnostic groups (according to the ICD10) from the nine Austrian provinces (Bundesländer) between 1989 and 2003. Our findings suggest that the change of the hospital financing system has induced a substantial decrease in the average hospital length of stay. This effect is more pronounced for diagnostic groups with a longer length of stay.