Health Care Providers Payments Regulation when Horizontal and Vertical Differentiation Matter
AbstractThis paper analyzes the regulation of payment schemes for health care providers competing in both quality and product differentiation of their services. The regulator uses two instruments: a prospective payment per patient and a cost reimbursement rate. When the regulator can only use a prospective payment, the optimal price involves a trade-off between the level of quality provision and the level of horizontal differentiation. If this pure prospective payment leads to underprovision of quality and overdifferentiation, a mixed reimbursement scheme allows the regulator to improve the allocation efficiency. This is true for a relatively low level of patients’transportation costs. We also show that if the regulator cannot commit to the level of the cost reimbursement rate, the resulting allocation can dominate the one with full commitment. In particular, some cost reimbursement might be optimal even for higher levels of transportation costs.
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 InfoPaper provided by Toulouse School of Economics (TSE) in its series TSE Working Papers with number 10-164.
Date of creation: Mar 2010
Date of revision:
Other versions of this item:
- Bardey, David & Canta, Chiara & Lozachmeur, Jean-Marie, 2010. "Health Care Providers Payments Regulation when Horizontal and Vertical Differentiation Matter," IDEI Working Papers 532, Institut d'Économie Industrielle (IDEI), Toulouse.
- I18 - Health, Education, and Welfare - - Health - - - Government Policy; Regulation; Public Health
- L51 - Industrial Organization - - Regulation and Industrial Policy - - - Economics of Regulation
This paper has been announced in the following NEP Reports:
- NEP-ALL-2010-10-02 (All new papers)
- NEP-COM-2010-10-02 (Industrial Competition)
- NEP-HEA-2010-10-02 (Health Economics)
- NEP-REG-2010-10-02 (Regulation)
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.:
- Ching-to Albert MA & Philippe CHONÉ, 2010.
"Optimal Health Care Contract under Physician Agency,"
Boston University - Department of Economics - Working Papers Series
WP2010-022, Boston University - Department of Economics.
- Philippe CHONÉ & Ching-to Albert MA, 2011. "Optimal Health Care Contract under Physician Agency," Annales d'Economie et de Statistique, ENSAE, issue 101-102, pages 229-256.
- Philippe Chone & Ching-to Albert Ma, 2007. "Optimal Health Care Contracts under Physician Agency," Boston University - Department of Economics - Working Papers Series WP2007-041, Boston University - Department of Economics, revised Sep 2007.
- Brekke, Kurt R. & Nuscheler, Robert & Straume, Odd Rune, 2002.
"Quality and location choices under price regulation,"
Discussion Papers, Research Unit: Market Processes and Governance
FS IV 02-28, Social Science Research Center Berlin (WZB).
- Kurt R. Brekke & Robert Nuscheler & Odd Rune Straume, 2006. "Quality and Location Choices under Price Regulation," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 15(1), pages 207-227, 03.
- Brekke, Kurt R. & Nuscheler, Robert & Straume, Odd Rune, 2002. "Quality and location choices under price regulation," Working Papers in Economics 24/02, University of Bergen, Department of Economics.
- Asher Wolinsky, 1994.
"Regulation of Duopoly: Managed Competition vs. Regulated Monopolies,"
1116, Northwestern University, Center for Mathematical Studies in Economics and Management Science.
- Asher Wolinsky, 1997. "Regulation of Duopoly: Managed Competition vs Regulated Monopolies," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 6(4), pages 821-847, December.
- Jean-Jacques Laffont & Jean Tirole, 1993. "A Theory of Incentives in Procurement and Regulation," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262121743, June.
- Economides, Nicholas, 1989. "Quality variations and maximal variety differentiation," Regional Science and Urban Economics, Elsevier, vol. 19(1), pages 21-29, February.
- William Jack(Georgetown University), 2004. "Optimal risk adjustment in a model with adverse selection and spatial competition," Working Papers gueconwpa~04-04-15, Georgetown University, Department of Economics.
- 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.
- Ellis, Randall P. & McGuire, Thomas G., 1986. "Provider behavior under prospective reimbursement : Cost sharing and supply," Journal of Health Economics, Elsevier, vol. 5(2), pages 129-151, June.
- 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.
- Chalkley, M. & Malcomson, J.M., 1995.
"Contracting for health services with unmonitored quality,"
Discussion Paper Series In Economics And Econometrics
9510, Economics Division, School of Social Sciences, University of Southampton.
- 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.
- 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.
- Herr, Annika, 2010.
"Quality and welfare in a mixed duopoly with regulated prices: The case of a public and a private hospital,"
DICE Discussion Papers
07, Heinrich‐Heine‐Universität Düsseldorf, Düsseldorf Institute for Competition Economics (DICE).
- Annika Herr, 2011. "Quality and Welfare in a Mixed Duopoly with Regulated Prices: The Case of a Public and a Private Hospital," German Economic Review, Verein für Socialpolitik, vol. 12(4), pages 422-437, November.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: ().
If references are entirely missing, you can add them using this form.