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Payment contracts in a preventive health care system: A perspective from Operations Management


  • Yaesoubi, Reza
  • Roberts, Stephen D.


We consider a health care system consisting of two noncooperative parties: a health purchaser (payer) and a health provider, where the interaction between the two parties is governed by a payment contract. We determine the contracts that coordinate the health purchaser–health provider relationship; i.e. the contracts that maximize the population's welfare while allowing each entity to optimize its own objective function. We show that under certain conditions (1) when the number of customers for a preventive medical intervention is verifiable, there exists a gate-keeping contract and a set of concave piecewise linear contracts that coordinate the system, and (2) when the number of customers is not verifiable, there exists a contract of bounded linear form and a set of incentive-feasible concave piecewise linear contracts that coordinate the system.

Suggested Citation

  • Yaesoubi, Reza & Roberts, Stephen D., 2011. "Payment contracts in a preventive health care system: A perspective from Operations Management," Journal of Health Economics, Elsevier, vol. 30(6), pages 1188-1196.
  • Handle: RePEc:eee:jhecon:v:30:y:2011:i:6:p:1188-1196
    DOI: 10.1016/j.jhealeco.2011.08.009

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    References listed on IDEAS

    1. 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.
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