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Paying for Performance in Hospitals

Listed author(s):
  • Hehenkamp, Burkhard


    (Department of Economics and Social Sciences, University of Dortmund)

  • Kaarbøe, Oddvar


    (Department of Economics and Health Economics Bergen, University of Bergen)

A frequent form of pay-for-performance programs increase reimbursement for all services by a certain percentage of the baseline price. We examine how such a “bonus-for-quality” reimbursement scheme affects the wage contract given to physicians by the hospital management. To this end, we determine the bonus inducing hospitals to incentivize their physicians to meet the quality standard. Additionally, we show that the health care payer has to complement the bonus with a (sometimes negative) block grant. We conclude the paper relating the role of the block grant to recent experiences in the American health care market.

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Paper provided by University of Bergen, Department of Economics in its series Working Papers in Economics with number 01/ 8.

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Length: 23 pages
Date of creation: 12 Mar 2008
Handle: RePEc:hhs:bergec:2000_000
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Institutt for økonomi, Universitetet i Bergen, Postboks 7802, 5020 Bergen, Norway

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