IDEAS home Printed from https://ideas.repec.org/p/pra/mprapa/23311.html
   My bibliography  Save this paper

Incentive Compatibility and Efficiency in the contractual Insurer-Provider Relationship: Economic Theory and practical Implications: The Case of North Carolina

Author

Listed:
  • Schmid, Andreas

Abstract

The paper is concerned with the efficient organization of contractual relationships between health insurers and providers. An introduction to relevant aspects of contract theory is followed by their adaptation to the characteristics of the health care system. The focus lies on an ex ante alignment of incentive structures as well as on an efficient handling of conflicts of interest once a contract has been sealed (ex post). The theory based conclusions are contrasted with the situation in North Carolina, USA. Due to the implemented regulation, this state is well suited to serve as a reference. An excursus to the American health care system provides the reader with the necessary background. A discussion of results completes the paper.

Suggested Citation

  • Schmid, Andreas, 2007. "Incentive Compatibility and Efficiency in the contractual Insurer-Provider Relationship: Economic Theory and practical Implications: The Case of North Carolina," MPRA Paper 23311, University Library of Munich, Germany, revised 2008.
    • Handle: RePEc:pra:mprapa:23311
    as

    Download full text from publisher

    File URL: https://mpra.ub.uni-muenchen.de/23311/1/MPRA_paper_23311.pdf
    File Function: original version
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Cuellar, Alison Evans & Gertler, Paul J., 2006. "Strategic integration of hospitals and physicians," Journal of Health Economics, Elsevier, vol. 25(1), pages 1-28, January.
    2. Erin Anderson & Hubert Gatignon, 2005. "Firms and the Creation of New Markets," Springer Books, in: Claude Menard & Mary M. Shirley (ed.), Handbook of New Institutional Economics, chapter 16, pages 401-431, Springer.
    3. Ronald H. Coase, 2008. "The Institutional Structure of Production," Springer Books, in: Claude Ménard & Mary M. Shirley (ed.), Handbook of New Institutional Economics, chapter 2, pages 31-39, Springer.
    4. Hart, Oliver & Moore, John, 1990. "Property Rights and the Nature of the Firm," Journal of Political Economy, University of Chicago Press, vol. 98(6), pages 1119-1158, December.
    5. Johann Behrens & Hartmut Kliemt & M. Vittoria Levati & Werner Güth, 2006. "Games that Doctors Play Two-layered agency problems in a medical system," Papers on Strategic Interaction 2006-02, Max Planck Institute of Economics, Strategic Interaction Group.
    6. Holmstrom, Bengt & Tirole, Jean, 1991. "Transfer Pricing and Organizational Form," The Journal of Law, Economics, and Organization, Oxford University Press, vol. 7(2), pages 201-228, Fall.
    7. Oliver E. Williamson, 2005. "The Economics of Governance," American Economic Review, American Economic Association, vol. 95(2), pages 1-18, May.
    8. Steven Tadelis & Oliver E.Williamson, 2012. "Transaction Cost Economics [The Handbook of Organizational Economics]," Introductory Chapters,, Princeton University Press.
    9. Grossman, Sanford J & Hart, Oliver D, 1986. "The Costs and Benefits of Ownership: A Theory of Vertical and Lateral Integration," Journal of Political Economy, University of Chicago Press, vol. 94(4), pages 691-719, August.
    10. Barry R. Weingast, 2005. "The Performance and Stability of Federalism: An Institutional Perspective," Springer Books, in: Claude Menard & Mary M. Shirley (ed.), Handbook of New Institutional Economics, chapter 7, pages 149-172, Springer.
    11. Claude Ménard, 2008. "A New Institutional Approach to Organization," Springer Books, in: Claude Ménard & Mary M. Shirley (ed.), Handbook of New Institutional Economics, chapter 12, pages 281-318, Springer.
    12. North, Douglass C, 1994. "Economic Performance through Time," American Economic Review, American Economic Association, vol. 84(3), pages 359-368, June.
    13. Holmstrom, Bengt & Milgrom, Paul, 1991. "Multitask Principal-Agent Analyses: Incentive Contracts, Asset Ownership, and Job Design," The Journal of Law, Economics, and Organization, Oxford University Press, vol. 7(0), pages 24-52, Special I.
    14. Herndon, Jill Boylston, 2002. "Health insurer monopsony power: the all-or-none model," Journal of Health Economics, Elsevier, vol. 21(2), pages 197-206, March.
    15. Klein, Benjamin, 1996. "Why Hold-Ups Occur: The Self-Enforcing Range of Contractual Relationships," Economic Inquiry, Western Economic Association International, vol. 34(3), pages 444-463, July.
    16. Udo Schneider & Volker Ulrich, 2008. "The physician-patient relationship revisited: the patient’s view," International Journal of Health Economics and Management, Springer, vol. 8(4), pages 279-300, December.
    17. Brigitte C. Madrian, 1994. "Employment-Based Health Insurance and Job Mobility: Is there Evidence of Job-Lock?," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 109(1), pages 27-54.
    18. Wolfgang Gick, 1999. "Vertikale Integration und informations- und kommunikationsintensive Dienstleistungen," Working Paper Series B 1999-08, Friedrich Schiller University of Jena, School of of Economics and Business Administration.
    19. Miller, Nolan H., 2006. "Insurer-provider integration, credible commitment, and managed-care backlash," Journal of Health Economics, Elsevier, vol. 25(5), pages 861-876, September.
    20. David E. M. Sappington, 1991. "Incentives in Principal-Agent Relationships," Journal of Economic Perspectives, American Economic Association, vol. 5(2), pages 45-66, Spring.
    21. Cutler, David M. & Zeckhauser, Richard J., 2000. "The anatomy of health insurance," Handbook of Health Economics, in: A. J. Culyer & J. P. Newhouse (ed.), Handbook of Health Economics, edition 1, volume 1, chapter 11, pages 563-643, Elsevier.
    22. Klein, Benjamin, 2000. "Fisher-General Motors and the Nature of the Firm," Journal of Law and Economics, University of Chicago Press, vol. 43(1), pages 105-141, April.
    23. Udo Schneider, 2005. "Asymmetric Information and Outcome-based Compensation in Health Care – Theoretical Implications," HEW 0501006, University Library of Munich, Germany.
    24. Katherine Ho, 2009. "Insurer-Provider Networks in the Medical Care Market," American Economic Review, American Economic Association, vol. 99(1), pages 393-430, March.
    25. Chalkley, Martin & Malcomson, James M., 2000. "Government purchasing of health services," Handbook of Health Economics, in: A. J. Culyer & J. P. Newhouse (ed.), Handbook of Health Economics, edition 1, volume 1, chapter 15, pages 847-890, Elsevier.
    26. Bengt Holmstrom & John Roberts, 1998. "The Boundaries of the Firm Revisited," Journal of Economic Perspectives, American Economic Association, vol. 12(4), pages 73-94, Fall.
    27. Buchmueller, Thomas C. & Jacobson, Mireille & Wold, Cheryl, 2006. "How far to the hospital?: The effect of hospital closures on access to care," Journal of Health Economics, Elsevier, vol. 25(4), pages 740-761, July.
    28. Victor P. Goldberg, 2005. "The Enforcement of Contracts and Private Ordering," Springer Books, in: Claude Menard & Mary M. Shirley (ed.), Handbook of New Institutional Economics, chapter 19, pages 491-511, Springer.
    29. Scott, Anthony, 2000. "Economics of general practice," Handbook of Health Economics, in: A. J. Culyer & J. P. Newhouse (ed.), Handbook of Health Economics, edition 1, volume 1, chapter 22, pages 1175-1200, Elsevier.
    30. Klein, Benjamin & Crawford, Robert G & Alchian, Armen A, 1978. "Vertical Integration, Appropriable Rents, and the Competitive Contracting Process," Journal of Law and Economics, University of Chicago Press, vol. 21(2), pages 297-326, October.
    31. Holmstrom, Bengt & Milgrom, Paul, 1994. "The Firm as an Incentive System," American Economic Review, American Economic Association, vol. 84(4), pages 972-991, September.
    32. Selder, Astrid, 2005. "Physician reimbursement and technology adoption," Journal of Health Economics, Elsevier, vol. 24(5), pages 907-930, September.
    33. Oliver E. Williamson, 2002. "The Lens of Contract: Private Ordering," American Economic Review, American Economic Association, vol. 92(2), pages 438-443, May.
    34. Klein, Benjamin, 1988. "Vertical Integration as Organizational Ownership: The Fisher Body-General Motors Relationship Revisited," The Journal of Law, Economics, and Organization, Oxford University Press, vol. 4(1), pages 199-213, Spring.
    35. Holmstrom, Bengt, 1999. "The Firm as a Subeconomy," The Journal of Law, Economics, and Organization, Oxford University Press, vol. 15(1), pages 74-102, April.
    36. Klein, Benjamin & Murphy, Kevin M, 1997. "Vertical Integration as a Self-Enforcing Contractual Arrangement," American Economic Review, American Economic Association, vol. 87(2), pages 415-420, May.
    37. Hurley, Jeremiah, 2000. "An overview of the normative economics of the health sector," Handbook of Health Economics, in: A. J. Culyer & J. P. Newhouse (ed.), Handbook of Health Economics, edition 1, volume 1, chapter 2, pages 55-118, Elsevier.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Gibbons, Robert, 2005. "Four forma(lizable) theories of the firm?," Journal of Economic Behavior & Organization, Elsevier, vol. 58(2), pages 200-245, October.
    2. Paul Walker, 2010. "The (Non)Theory Of The Knowledge Firm," Scottish Journal of Political Economy, Scottish Economic Society, vol. 57(1), pages 1-32, February.
    3. Timothy Bresnahan & Jonathan Levin, 2012. "Vertical Integration and Market Structure [The Handbook of Organizational Economics]," Introductory Chapters,, Princeton University Press.
    4. Maloney, Michael T., 2017. "Alchian remembrances," Journal of Corporate Finance, Elsevier, vol. 44(C), pages 561-582.
    5. Andreas Roider, 2004. "Asset Ownership and Contractibility of Interaction," RAND Journal of Economics, The RAND Corporation, vol. 35(4), pages 787-802, Winter.
    6. Christian A. Ruzzier, 2009. "Asset Specificity and Vertical Integration: Williamson’s Hypothesis Reconsidered," Harvard Business School Working Papers 09-119, Harvard Business School.
    7. Francine Lafontaine & Margaret Slade, 2007. "Vertical Integration and Firm Boundaries: The Evidence," Journal of Economic Literature, American Economic Association, vol. 45(3), pages 629-685, September.
    8. Paul Walker, 2008. "The (non)Theory of the Knowledge Firm," Working Papers in Economics 08/07, University of Canterbury, Department of Economics and Finance.
    9. Hideshi Itoh, 2006. "The Theories of International Outsourcing and Integration : A Theoretical Overview from the Perspective of Organizational Economics," Microeconomics Working Papers 21891, East Asian Bureau of Economic Research.
    10. Wang, Sen & Bogle, Tim & van Kooten, G. Cornelis, 2012. "Forestry and the New Institutional Economics," Working Papers 130818, University of Victoria, Resource Economics and Policy.
    11. Robert Gibbons & John Roberts, 2012. "The Handbook of Organizational Economics," Economics Books, Princeton University Press, edition 1, volume 1, number 9889.
    12. Thiele, Veikko, 2007. "The Demand for Tailored Goods and the Theory of the Firm," MPRA Paper 2471, University Library of Munich, Germany.
    13. Han, Min-Yeon & Jun, Sang-Gyung & Oh, Ji Yeol Jimmy & Kang, Hyoung-Goo, 2023. "Who should choose the money managers? Institutional sponsors' equity manager performance," Pacific-Basin Finance Journal, Elsevier, vol. 78(C).
    14. Miguel Espinosa, 2021. "Labor Boundaries and Skills: The Case of Lobbyists," Management Science, INFORMS, vol. 67(3), pages 1586-1607, March.
    15. Robert Gibbons, 2010. "Inside Organizations: Pricing, Politics, and Path Dependence," Annual Review of Economics, Annual Reviews, vol. 2(1), pages 337-365, September.
    16. Christopher Hansman & Jonas Hjort & Gianmarco León-Ciliotta & Matthieu Teachout, 2020. "Vertical Integration, Supplier Behavior, and Quality Upgrading among Exporters," Journal of Political Economy, University of Chicago Press, vol. 128(9), pages 3570-3625.
    17. Ilya Segal & Michael D.Whinston, 2012. "Property Rights [The Handbook of Organizational Economics]," Introductory Chapters,, Princeton University Press.
    18. Kirsten Foss & Nicolai J. Foss, 1999. "Understanding Ownership Residual Rights of Control and Appropriable Control Rights," DRUID Working Papers 99-4, DRUID, Copenhagen Business School, Department of Industrial Economics and Strategy/Aalborg University, Department of Business Studies.
    19. Raghuram G. Rajan & Luigi Zingales, 2001. "The Firm as a Dedicated Hierarchy: A Theory of the Origins and Growth of Firms," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 116(3), pages 805-851.
    20. Wang, Tianxi, 2009. "Ownership, Control, and Incentive," Economics Discussion Papers 2955, University of Essex, Department of Economics.

    More about this item

    Keywords

    hospital; insurer; health care system; contract theory; USA;
    All these keywords.

    JEL classification:

    • D86 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Economics of Contract Law
    • I11 - Health, Education, and Welfare - - Health - - - Analysis of Health Care Markets
    • L22 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Firm Organization and Market Structure

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:pra:mprapa:23311. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Joachim Winter (email available below). General contact details of provider: https://edirc.repec.org/data/vfmunde.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.