In this paper we analyze the effects of some distortions induced by prospective payment system, i.e. Upcoding, Cream Skimming and Readmissions, on hospitals’ technical efficiency. We estimate a production function using a population–based dataset composed by all active hospitals in an Italian region during the period 1998–2007. We show that cream skimming and upcoding have a negative impact onhospitals’ technical efficiency, while readmissions have a positive effect. Moreover, we find that private hospitals are more engaged in cream skimming than public and not–for–profit ones, while we observe no ownership differences regarding upcoding. Not–for–profit hospitals have the highest readmission index. Last, not–for–profit and publichospitals have the same efficiency levels, while private hospitals have the lowest technical efficiency.
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