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Optimal Healthcare Contracts: Theory and Empirical Evidence from Italy

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  • De Fraja, Gianni
  • Berta, Paolo
  • Verzillo, Stefano

Abstract

In this paper we investigate the nature of the contracts between a large health-care purchaser and health service providers in a prospective payment system. We model theoretically the interaction between patients choice and cream-skimming by hospitals. We test the model using a very large and detailed administrative dataset for the largest region in Italy. In line with our theoretical results, we show that the state funded purchaser offers providers a system of incentives such that the most efficient providers both treat more patients and also treat more difficult patients, thus receiving a higher average payment per treatment.

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  • De Fraja, Gianni & Berta, Paolo & Verzillo, Stefano, 2018. "Optimal Healthcare Contracts: Theory and Empirical Evidence from Italy," CEPR Discussion Papers 13357, C.E.P.R. Discussion Papers.
    • Handle: RePEc:cpr:ceprdp:13357
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    1. Dennis Epple & Richard Romano, 2008. "Educational Vouchers And Cream Skimming," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 49(4), pages 1395-1435, November.
    2. Robert B. Fetter, 1991. "Diagnosis Related Groups: Understanding Hospital Performance," Interfaces, INFORMS, vol. 21(1), pages 6-26, February.
    3. Brenna, Elenka, 2011. "Quasi-market and cost-containment in Beveridge systems: The Lombardy model of Italy," Health Policy, Elsevier, vol. 103(2), pages 209-218.
    4. Paul J. Eliason & Paul L. E. Grieco & Ryan C. McDevitt & James W. Roberts, 2018. "Strategic Patient Discharge: The Case of Long-Term Care Hospitals," American Economic Review, American Economic Association, vol. 108(11), pages 3232-3265, November.
    5. Joseph G. Altonji & Ching-I Huang & Christopher R. Taber, 2015. "Estimating the Cream Skimming Effect of School Choice," Journal of Political Economy, University of Chicago Press, vol. 123(2), pages 266-324.
    6. De Fraja, Gianni, 2000. "Contracts for health care and asymmetric information," Journal of Health Economics, Elsevier, vol. 19(5), pages 663-677, September.
    7. Bayindir, Esra Eren, 2012. "Hospital ownership type and treatment choices," Journal of Health Economics, Elsevier, vol. 31(2), pages 359-370.
    8. Liran Einav & Amy Finkelstein & Neale Mahoney, 2018. "Provider Incentives and Healthcare Costs: Evidence From Long‐Term Care Hospitals," Econometrica, Econometric Society, vol. 86(6), pages 2161-2219, November.
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    Cited by:

    1. Berta, Paolo & Guerriero, Carla & Levaggi, Rosella, 2021. "Hospitals’ strategic behaviours and patient mobility: Evidence from Italy," Socio-Economic Planning Sciences, Elsevier, vol. 77(C).

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    More about this item

    Keywords

    Patients choice; Cream skimming; Optimal healthcare contracts; Hospitals; Lombardy;
    All these keywords.

    JEL classification:

    • I11 - Health, Education, and Welfare - - Health - - - Analysis of Health Care Markets
    • I18 - Health, Education, and Welfare - - Health - - - Government Policy; Regulation; Public Health
    • D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design
    • H42 - Public Economics - - Publicly Provided Goods - - - Publicly Provided Private Goods

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