Asymmetric information and pooling contracts in hospital sector
AbstractMost of regulators in health care systems use pooling contracts such that payment do not depend on the level of severity. This policy is motivated by concerns about the moral hazard problem. In this paper, we show that it can be optimal when patient severity is private information because of the non-responsiveness phenomenon. We show in which cases the hospital may be non responsive to the regulator objective under adverse selection. We exhibit necessary conditions under which pooling contracts are optimal and we characterize these mechanisms when the hospital is self-interested and perfectly altruistic. In the first case, the fixed payment is equal to the cost of treating the patient with the highest severity whereas it is equal to the mean value of the treatment cost in the second one.
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Bibliographic InfoPaper provided by Paris Dauphine University in its series Economics Papers from University Paris Dauphine with number 123456789/5993.
Date of creation: 2009
Date of revision:
Publication status: Published in Cahiers de la Chaire Santé, 2009
Hospital regulation; patient severity; non-responsiveness; altruism; adverse selection;
Find related papers by JEL classification:
- I1 - Health, Education, and Welfare - - Health
- L3 - Industrial Organization - - Nonprofit Organizations and Public Enterprise
- D8 - Microeconomics - - Information, Knowledge, and Uncertainty
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