Risk selection and matching in performance-based contracting
AbstractThis paper examines selection and matching incentives of performance-based contracting (PBC) in a model of patient heterogeneity, provider horizontal differentiation and asymmetric information. Treatment effectiveness is affected by the match between a patient's illness severity and a provider's treatment intensity. Before PBC, a provider's revenue is unrelated to treatment effectiveness; therefore, providers supply treatments even if their treatment intensities do not match with the patients' severities. Under PBC, budget allocation is positively related to treatment performance; patient-provider mismatch is reduced because patients are referred more often. Using data from the state of Maine, we show that PBC leads to more referrals and better match between illness severity and treatment intensity. Moreover, we find that PBC has a positive but insignificant effect on dumping. Copyright © 2002 John Wiley & Sons, Ltd.
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
Bibliographic InfoArticle provided by John Wiley & Sons, Ltd. in its journal Health Economics.
Volume (Year): 12 (2003)
Issue (Month): 5 ()
Contact details of provider:
Web page: http://www3.interscience.wiley.com/cgi-bin/jhome/5749
Other versions of this item:
- Mingshan Lu & Ching-to Albert Ma & Lasheng Yuan, 2000. "Risk Selection and Matching in Performance-Based Contracting," Papers 0101, Boston University - Industry Studies Programme.
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Mingshan Lu, 1999. "Separating the True Effect from Gaming in Incentive-Based Contracts in Health Care," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 8(3), pages 383-431, 09.
- Newhouse, Joseph P. & Byrne, Daniel J., 1988. "Did Medicare's Prospective Payment System cause length of stay to fall?," Journal of Health Economics, Elsevier, vol. 7(4), pages 413-416, December.
- Ellis, Randall P. & McGuire, Thomas G., 1996.
"Hospital response to prospective payment: Moral hazard, selection, and practice-style effects,"
Journal of Health Economics,
Elsevier, vol. 15(3), pages 257-277, June.
- Randall P. Ellis & Thomas G. McGuire, 1994. "Hospital Response to Prospective Payment: Moral Hazard, Selection, and Practice-Style Effects," Papers 0050, Boston University - Industry Studies Programme.
- Holmstrom, Bengt R. & Tirole, Jean, 1989. "The theory of the firm," Handbook of Industrial Organization, in: R. Schmalensee & R. Willig (ed.), Handbook of Industrial Organization, edition 1, volume 1, chapter 2, pages 61-133 Elsevier.
- Joseph P. Newhouse, 1996. "Reimbursing Health Plans and Health Providers: Efficiency in Production versus Selection," Journal of Economic Literature, American Economic Association, vol. 34(3), pages 1236-1263, September.
- Norton, Edward C., 1992. "Incentive regulation of nursing homes," Journal of Health Economics, Elsevier, vol. 11(2), pages 105-128, August.
- Ellis, Randall P. & McGuire, Thomas G., 1990. "Optimal payment systems for health services," Journal of Health Economics, Elsevier, vol. 9(4), pages 375-396, December.
- Ching-to Albert Ma & Thomas G. McGuire, 1995.
"Optimal Health Insurance and Provider Payment,"
0059, Boston University - Industry Studies Programme.
- Gaynor, Martin & Pauly, Mark V, 1990. "Compensation and Productive Efficiency of Partnerships: Evidence from Medical Group Practice," Journal of Political Economy, University of Chicago Press, vol. 98(3), pages 544-73, June.
- Ching-to Albert Ma, 1994.
"Health Care Payment Systems: Cost and Quality Incentives,"
0047, Boston University - Industry Studies Programme.
- Ma, Ching-to Albert, 1994. "Health Care Payment Systems: Cost and Quality Incentives," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 3(1), pages 93-112, Spring.
- Blomqvist, A., 1997. "Monopolistic Competition and Supply-Side Cost Sharing in the Physician Services Market," UWO Department of Economics Working Papers 9705, University of Western Ontario, Department of Economics.
- Chen, Yijuan, 2011.
"Why are health care report cards so bad (good)?,"
Journal of Health Economics,
Elsevier, vol. 30(3), pages 575-590, May.
- Udo Schneider, 2005. "Asymmetric Information and Outcome-based Compensation in Health Care – Theoretical Implications," HEW 0501006, EconWPA.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Wiley-Blackwell Digital Licensing) or (Christopher F. Baum).
If references are entirely missing, you can add them using this form.