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Investment in hospital care technology under different purchasing rules: a real option approach Author info | Abstract | Publisher info | Download info | Related research | Statistics Rossella Levaggi () (Università di Brescia)
Michele Moretto () (Università di Padova)
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Quality of health care is the product of several factors as the literature has long recognized. In this article we focus on the relationship between quality and investment in health technology by analysing the optimal investment decision in a new health care technology of a repre sentative hospital that maximises its surplus in an uncertain environment. The new technology allows the hospital to increase the quality level of the care provided, but the investment is irreversible. The article uses the framework of the real option literature to show how the purchaser might inuence the quality level by setting a quality-contingent long-term contract with the hospital.The investment in new technology is in fact best incentivated within a long-term contract where the number of treatments reimbursed depends on the level of investment made when the technology is new. In this way, asymmetry of information does not affect the outcome of the contract. In our model in fact the purchaser can verify the level of the investment only at the end of each period but the purchasing rule has an anticipating e¤ect on the decision to invest.
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Paper provided by Dipartimento di Scienze Economiche "Marco Fanno" in its series "Marco Fanno" Working Papers with number
0046.
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Length: 36 pages
Date of creation: Sep 2007Date of revision:
Handle: RePEc:pad:wpaper:0046Contact details of provider: Postal: via del Santo, 33 - 35122 Padova Phone: +39 +49 8274210 Fax: +39 +49 827.4211 Web page: http://www.decon.unipd.it/ More information through EDIRC
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Keywords: Health care technologies Medical quality Irreversible investments Real options. Other versions of this item:
Find related papers by JEL classification: I11 - Health, Education, and Welfare - - Health - - - Analysis of Health Care Markets D81 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Criteria for Decision-Making under Risk and Uncertainty
This paper has been announced in the following NEP Reports :
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references Cited by : (explanations , 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.)
Rossella Levaggi & Michele Moretto & Vincenzo Rebba, 2007.
"Investment decisions in hospital technology when physicians are devoted workers ,"
"Marco Fanno" Working Papers
0048, Dipartimento di Scienze Economiche "Marco Fanno".
[Downloadable!]
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