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The payment of hospital services: a waiting lists model

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Author Info
Alessandra Ferrari (Department of Economics, University of Reading)
Abstract

This paper analyses the incentive properties of prospective payment systems for hospital contracts, a key feature in many health systems’ reforms. Building on current literature, the model explicitly allows for the existence of waiting time, modelled as adversely affecting patients’ utility and therefore reducing social welfare. The model shows that rewarding hospitals for their demand leads to the first best solution, identified with respect to the relevant quality and quantity variables. The additional separate payment of a price per case is instead required when the social cost of waiting is introduced alongside the private costs. 1. Introduction. The last two decades have witnessed major changes in the organisation of health services. Various factors, among which the aging of the population and technical progress, led to growing demand levels and expectations; then to discontent, cost increases and general financial crisis. In general terms this scenario has characterised

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Paper provided by Henley Business School, Reading University in its series Economics & Management Discussion Papers with number em-dp2004-25.

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Length: 33 pages
Date of creation: 2004
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Handle: RePEc:rdg:emxxdp:em-dp2004-25

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Find related papers by JEL classification:
I11 - Health, Education, and Welfare - - Health - - - Analysis of Health Care Markets
L11 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Production, Pricing, and Market Structure; Size Distribution of Firms

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  1. Chalkley, Martin & Malcomson, James M, 1998. "Contracting for Health Services with Unmonitored Quality," Economic Journal, Royal Economic Society, vol. 108(449), pages 1093-1110, July. [Downloadable!] (restricted)
    Other versions:
  2. Ma, Ching-to Albert, 1994. "Health Care Payment Systems: Cost and Quality Incentives," Journal of Economics & Management Strategy, Blackwell Publishing, vol. 3(1), pages 93-112, Spring.
    Other versions:
  3. Propper, Carol, 2000. "The demand for private health care in the UK," Journal of Health Economics, Elsevier, vol. 19(6), pages 855-876, November. [Downloadable!] (restricted)
  4. 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. [Downloadable!] (restricted)
  5. Chalkley, Martin & Malcomson, James M., 1998. "Contracting for health services when patient demand does not reflect quality," Journal of Health Economics, Elsevier, vol. 17(1), pages 1-19, January. [Downloadable!] (restricted)
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  6. De Fraja, Gianni, 2000. "Contracts for health care and asymmetric information," Journal of Health Economics, Elsevier, vol. 19(5), pages 663-677, September. [Downloadable!] (restricted)
  7. Chalkley, Martin & Malcomson, James M, 1996. "Contracts for the National Health Service," Economic Journal, Royal Economic Society, vol. 106(439), pages 1691-1701, November. [Downloadable!] (restricted)
  8. Besley, Timothy & Hall, John & Preston, Ian, 1999. "The demand for private health insurance: do waiting lists matter?," Journal of Public Economics, Elsevier, vol. 72(2), pages 155-181, May. [Downloadable!] (restricted)
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  9. Chalkley, Martin & Malcomson, James M, 1996. "Competition in NHS Quasi-markets," Oxford Review of Economic Policy, Oxford University Press, vol. 12(4), pages 89-99, Winter.
  10. Chalkley, M. & Malcomson, J.M., 1996. "Contracts for National Health Service," Discussion Paper Series In Economics And Econometrics 9641, Economics Division, School of Social Sciences, University of Southampton.
  11. Pauly, Mark V & Redisch, Michael, 1973. "The Not-For-Profit Hospital as a Physicians' Cooperative," American Economic Review, American Economic Association, vol. 63(1), pages 87-99, March. [Downloadable!] (restricted)
  12. Ellis, Randall P., 1998. "Creaming, skimping and dumping: provider competition on the intensive and extensive margins1," Journal of Health Economics, Elsevier, vol. 17(5), pages 537-555, October. [Downloadable!] (restricted)
  13. Barker, K. & Chalkley, M. & Malcomson, J.M. & Montgomery, J., 1996. "Contracting in the NHS Legal and Economic Issues," Discussion Paper Series In Economics And Econometrics 9622, Economics Division, School of Social Sciences, University of Southampton.
  14. Rogerson, William P, 1994. "Choice of Treatment Intensities by a Nonprofit Hospital under Prospective Pricing," Journal of Economics & Management Strategy, Blackwell Publishing, vol. 3(1), pages 7-51, Spring.
  15. Culyer, A J, 1971. "The Nature of the Commodity 'Health Care' and Its Efficient Allocation," Oxford Economic Papers, Oxford University Press, vol. 23(2), pages 189-211, July. [Downloadable!] (restricted)
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