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Paying for Performance in Hospitals


Author Info

  • Burkhard Hehenkamp

    (Technische Universität Dortmund, Wirtschafts- und Sozialwissenschaftliche Fakultät, Lehrstuhl VWL (Mikroökonomie), 44221 Dortmund, Germany)

  • Oddvar Kaarbøe

    (Department of Economics and Health Economics Bergen (HEB), University of Bergen, Hermann Fossg. 6, N-5007 Bergen, Norway)


A frequent form of pay-for-performance programs increase reimbursement for all services by a certain percentage of the baseline price. We examine how such a ?bonus-for-quality? reimbursement scheme a¤ects the wage contract given to physicians by the hospital management. To this end, we determine the bonus inducing hospitals to incentivize their physicians to meet the quality standard. Additionally, we show that the health care payer has to complement the bonus with a (sometimes negative) block grant. We conclude the paper relating the role of the block grant to recent experiences in health care market.

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Bibliographic Info

Article provided by Queensland University of Technology (QUT), School of Economics and Finance in its journal Economic Analysis and Policy (EAP).

Volume (Year): 41 (2011)
Issue (Month): 1 (March)
Pages: 49-70

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Handle: RePEc:eap:articl:v:41:y:2011:i:1:p:49-70

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Keywords: Paying-for-Performance; Quality; Hospital Financing;

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