Starting in January 2002, the majority of the Norwegian Parliament transferred the ownership of all public hospitals from the county governments to the central state. This round of reforms represents the most recent attempt by the central government to resolve major problems in the Norwegian health care system. In this paper, we describe these reforms and the problems they are intended to remedy. We also indicate further proposals that we believe need to be accomplished to ensure that the reforms become successful. The main lesson to be learned from the Norwegian experiment is that central government involvement in local and county government decision-making can lead to ambiguous responsibilities and a lack of transparency. This appears to be particularly the case when central government involvement implies shared responsibilities for the financing of particular services.

Many publicly funded health systems use activity-based financing to increase hospital production and efficiency. The aim of this study is to investigate whether price changes for different treatments affect the number of patients treated and the mix of activity provided by hospitals. We exploit the variations in prices created by the changes in the national average treatment cost per diagnosis-related group (DRG) offered to Norwegian hospitals over a period of 5 years (2003-2007). We use the data from Norwegian Patient Register, containing individual-level information on age, gender, type of treatment, diagnosis, number of co-morbidities and the national average treatment costs per DRG. We employ fixed-effect models to examine the changes in the number of patients treated within the DRGs over time. The results suggest that a 10% increase in price leads to about 0.8-1.3% increase in the number of patients treated for DRGs, which are medical (for both emergency and elective patients). In contrast, we find no price effect for DRGs that are surgical (for both emergency and elective patients). Moreover, we find evidence of upcoding. A 10% increase in the ratio of prices between patients with and without complications increases the proportion of patients coded with complications by 0.3-0.4 percentage points.

In recent years, decentralization of financial and political power has been perceived as a useful means to improve outcomes of the health care sector of many European countries. Such reforms could be the result of fashionable policy trends, rather than being based on knowledge of "what works". If decentralization is the favored strategy in health care, studies of countries that go against the current trend will be of interest and importance as they provide information about the potential drawbacks of decentralization. In Norway, specialized health care has recently been recentralized. In this paper, we review some of the evidence now available on the economic effects of recentralization. Although recentralization has been associated with improvements in both cost efficiency and technical efficiency this may have been caused by the increasing role of activity-based funding methods used in the allocation of health care resources. However, recentralization was also associated with an increase in the rate of growth of real resources and the proportion of total costs being met by supplementary funding. As a result, recentralization failed to address the issues of cost containment and reductions in budget deficits.

We present a model of optimal contracting between a purchaser and a provider of health services when quality has two dimensions. We assume that one dimension of quality is veri…able (dimension 1) and one dimension is not veri…able (dimension 2).We show that the power of the incentive scheme for the veri…able dimension depends critically on the extent to which quality 1 increases or decreases the provider's marginal disutility and the patients' marginal bene…t from quality 2 (i.e. substitutability or complementarity). Our main result is that under some circumstances a high-powered incentive scheme can be optimal even when the two quality dimensions are substitutes.

We investigate whether socioeconomic status, measured by income and education, affects waiting time when controls for severity and hospital-specific conditions are included. We also examine which aspects of the hospital supply (attachment to local hospital, traveling time, or choice of hospital) matter most for unequal treatment of different socioeconomic groups. The study uses administrative data from all elective inpatient and outpatient stays in somatic hospitals in Norway. The main results are that we find very little indication of discrimination with regard to income and education when both severity and aspects of hospital supply are controlled for. This result holds for both men and women.