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The payment of hospital services: a waiting lists model

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  • Alessandra Ferrari

    (Department of Economics, University of Reading)

Abstract

This paper analyses the incentive properties of prospective payment systems for hospital contracts, a key feature in many health systems' reforms. Building on current literature, the model explicitly allows for the existence of waiting time, modelled as adversely affecting patients' utility and therefore reducing social welfare. The model shows that rewarding hospitals for their demand leads to the first best solution, identified with respect to the relevant quality and quantity variables. The additional separate payment of a price per case is instead required when the social cost of waiting is introduced alongside the private costs.

Suggested Citation

  • Alessandra Ferrari, 2004. "The payment of hospital services: a waiting lists model," Economics Discussion Papers em-dp2004-25, Department of Economics, University of Reading.
  • Handle: RePEc:rdg:emxxdp:em-dp2004-25
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    More about this item

    JEL classification:

    • I11 - Health, Education, and Welfare - - Health - - - Analysis of Health Care Markets
    • L11 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Production, Pricing, and Market Structure; Size Distribution of Firms

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