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Price adjustment in the hospital sector

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  • Miraldo, Marisa
  • Siciliani, Luigi
  • Street, Andrew

Abstract

Abstract We analyse the properties of optimal price adjustment to hospitals when no lump-sum transfers are allowed and when prices differ to reflect observable exogenous differences in costs. We find that: (a) when the marginal benefit from treatment is decreasing and the cost function is the power function, price adjustment for hospitals with higher costs is positive but partial; if the marginal benefit is constant, the price is identical across providers; (b) if the cost function is exponential or it is separable in monetary and non-monetary costs (and linear in monetary costs), price adjustment is positive even when the marginal benefit is constant; (c) higher inequality aversion of the purchaser increases concentration in prices and lowers concentration in quantities; (d) if some dimensions of costs are private information, a higher correlation between the observable and unobservable cost component increases the optimal price for providers whose observable costs are above the average.

Suggested Citation

  • Miraldo, Marisa & Siciliani, Luigi & Street, Andrew, 2011. "Price adjustment in the hospital sector," Journal of Health Economics, Elsevier, vol. 30(1), pages 112-125, January.
  • Handle: RePEc:eee:jhecon:v:30:y:2011:i:1:p:112-125
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    Citations

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    Cited by:

    1. Houyuan Jiang & Zhan Pang & Sergei Savin, 2012. "Performance-Based Contracts for Outpatient Medical Services," Manufacturing & Service Operations Management, INFORMS, vol. 14(4), pages 654-669, October.
    2. Ma, Ching-to Albert & Mak, Henry Y., 2015. "Information disclosure and the equivalence of prospective payment and cost reimbursement," Journal of Economic Behavior & Organization, Elsevier, vol. 117(C), pages 439-452.
    3. Galina Besstremyannaya, 2015. "Heterogeneous effect of residency matching and prospective payment on labor returns and hospital scale economies," Discussion Papers 15-001, Stanford Institute for Economic Policy Research.
    4. Galina Besstremyannaya, 2014. "The adverse effects of value-based purchasing in health care: dynamic quantile regression with endogeneity," Discussion Papers 14-006, Stanford Institute for Economic Policy Research.
    5. Galina Besstremyannaya, 2015. "The adverse effects of incentives regulation in health care: a comparative analysis with the U.S. and Japanese hospital data," Working Papers w0218, Center for Economic and Financial Research (CEFIR).
    6. Jurgita Januleviciute & Jan Erik Askildsen & Oddvar Kaarboe & Luigi Siciliani & Matt Sutton, 2016. "How do Hospitals Respond to Price Changes? Evidence from Norway," Health Economics, John Wiley & Sons, Ltd., vol. 25(5), pages 620-636, May.
    7. Bisceglia, Michele & Cellini, Roberto & Grilli, Luca, 2017. "Regional regulators in healthcare service under quality competition: A game theoretical model," MPRA Paper 80507, University Library of Munich, Germany.
    8. Miraldo, Marisa & Siciliani, Luigi & Street, Andrew, 2011. "Price adjustment in the hospital sector," Journal of Health Economics, Elsevier, vol. 30(1), pages 112-125, January.
    9. Houyuan Jiang & Zhan Pang & Sergei Savin, 2017. "Improving Patient Access to Care: Performance Incentives and Competition in Healthcare Markets," Working Papers 2017/01, Cambridge Judge Business School, University of Cambridge.

    More about this item

    Keywords

    Price adjustment Hospitals DRGs;

    JEL classification:

    • I11 - Health, Education, and Welfare - - Health - - - Analysis of Health Care Markets
    • I18 - Health, Education, and Welfare - - Health - - - Government Policy; Regulation; Public Health

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