The effect of competition on the relationship between the introduction of the DRG system and quality of care in Korea

Background: The diagnosis-related group-based prospective payment programme was introduced in Korea in 1997 as a pilot programme to control health spending. In July 2013, the programme was implemented throughout the nation. The aim of our study is to evaluate the relationship between quality of care and market competition following the introduction of the new payment system in Korea. Methods: We conduct an observational analysis using National Health Insurance claim data from 2011 to 2014. We analyse data on readmission within 30 days, length of stay, and number of outpatient visits for 1742 hospitals and 821 912 cases. We use a generalized estimating equation model to evaluate readmission within 30 days and number of outpatient visits and a multi-level regression model to assess length of stay. Results: Total readmission within 30 days is 10 727 (1.3%). High competition areas present a lower risk of readmission [odds ratio (OR): 0.95, P: 0.0277], a longer length of stay (1%, P < 0.0001), and an increased number of outpatient visits (Relative Risk: 1.11, P: 0.0011) as compared with moderate competition areas. Risk of readmission is higher in low competition areas as compared with moderate competition areas (OR: 1.21, P < 0.0001). Conclusion: The effects of the introduction of the new payment system differed by degree of market competition. Thus, evaluation about the effect of new payment system on hospital performance should be measured in combination with the degree of hospital market structure.