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The optimality of hospital financing system: the role of physician-manager interactions

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  • D. Crainich

    (LEM - Lille - Economie et Management - Université de Lille, Sciences et Technologies - CNRS - Centre National de la Recherche Scientifique)

  • H. Leleu

    (LEM - Lille - Economie et Management - Université de Lille, Sciences et Technologies - CNRS - Centre National de la Recherche Scientifique)

  • A. Mauleon

Abstract

In a paper published by Ma (1994) it was argued that the prospective payment system in the hospital industry was superior to the cost based reimbursement system to achieve both cost reduction and quality improvement ob jectives. In the analysis, it was assumed that quality and costs decisions were made by a single agent. Our paper compares these two financing systems assuming that the main decisions taken within the hospital are shared between physicians (quality of treatment) and hospital managers (cost reduction). If Ma’s conclusions hold in the US context (where the hospital managers bear the whole cost of treatment), we show that the ability of a prospective payment system to achieve both ob jectives is very depending of the type of interaction between the agents when physicians bear a part of the treatment cost as it is the case in many European countries.
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Suggested Citation

  • D. Crainich & H. Leleu & A. Mauleon, 2006. "The optimality of hospital financing system: the role of physician-manager interactions," Post-Print hal-00246117, HAL.
    • Handle: RePEc:hal:journl:hal-00246117
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    References listed on IDEAS

    as
    1. Boadway, Robin & Marchand, Maurice & Sato, Motohiro, 2004. "An optimal contract approach to hospital financing," Journal of Health Economics, Elsevier, vol. 23(1), pages 85-110, January.
    2. Jeffrey E. Harris, 1977. "The Internal Organization of Hospitals: Some Economic Implications," Bell Journal of Economics, The RAND Corporation, vol. 8(2), pages 467-482, Autumn.
    3. Chalkley, Martin & Malcomson, James M, 1998. "Contracting for Health Services with Unmonitored Quality," Economic Journal, Royal Economic Society, vol. 108(449), pages 1093-1110, July.
    4. Ma, Ching-to Albert, 1994. "Health Care Payment Systems: Cost and Quality Incentives," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 3(1), pages 93-112, Spring.
    5. Pope, Gregory C., 1990. "Using hospital-specific costs to improve the fairness of prospective reimbursement," Journal of Health Economics, Elsevier, vol. 9(3), pages 237-251, November.
    6. Dor, Avi & Watson, Harry, 1995. "The hospital-physician interaction in U.S. hospitals: Evolving payment schemes and their incentives," European Economic Review, Elsevier, vol. 39(3-4), pages 795-802, April.
    7. Custer, William S. & Moser, James W. & Musacchio, Robert A. & Willke, Richard J., 1990. "The production of health care services and changing hospital reimbursement : The role of hospital-medical staff relationships," Journal of Health Economics, Elsevier, vol. 9(2), pages 167-192, September.
    8. repec:bla:jemstr:v:3:y:1994:i:1:p:93-112:a is not listed on IDEAS
    9. Joseph P. Newhouse, 1996. "Reimbursing Health Plans and Health Providers: Efficiency in Production versus Selection," Journal of Economic Literature, American Economic Association, vol. 34(3), pages 1236-1263, September.
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    Cited by:

    1. Kathleen A. Carroll & Jane E. Ruseski, 2011. "Modeling Internal Decision Making Process: An Explanation Of Conflicting Empirical Results On Behavior Of Non‐Profit And For‐Profit Hospitals," Contemporary Economic Policy, Western Economic Association International, vol. 29(4), pages 510-523, October.
    2. David Crainich & Hervé Leleu & Ana Mauleon, 2011. "Hospital’s activity-based financing system and manager: physician interaction," The European Journal of Health Economics, Springer;Deutsche Gesellschaft für Gesundheitsökonomie (DGGÖ), vol. 12(5), pages 417-427, October.
    3. Makoto Kakinaka & Ryuta Kato, 2013. "Regulated medical fee schedule of the Japanese health care system," International Journal of Health Economics and Management, Springer, vol. 13(3), pages 301-317, December.

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    More about this item

    JEL classification:

    • H51 - Public Economics - - National Government Expenditures and Related Policies - - - Government Expenditures and Health
    • I18 - Health, Education, and Welfare - - Health - - - Government Policy; Regulation; Public Health
    • D21 - Microeconomics - - Production and Organizations - - - Firm Behavior: Theory

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