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Specialist payment schemes and patient selection in private and public hospitals, CHERE Discussion Paper No 54

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  • Donald J Wright

    (Department of Economics, University of Sydney)

Abstract

It has been observed that specialist physicians who work in private hospitals are usually paid by fee-for-service while specialist physicians who work in public hospitals are usually paid by salary. This paper provides an explanation for this observation. Essentially, fee-for-service aligns the interests of income preferring specialist with profit maximizing private hospitals and results in private hospitals treating a high proportion of short stay patients. On the other hand, salary aligns the interests of fairness preferring specialists with welfare maximizing public hospital and results in public hospitals treating all patients irrespective of their length of stay.

Suggested Citation

  • Donald J Wright, 2004. "Specialist payment schemes and patient selection in private and public hospitals, CHERE Discussion Paper No 54," Discussion Papers 54, CHERE, University of Technology, Sydney.
    • Handle: RePEc:her:chedps:54
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    File URL: http://www.chere.uts.edu.au/pdf/dp54.pdf
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    References listed on IDEAS

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    1. Chalkley, Martin & Malcomson, James M., 1998. "Contracting for health services when patient demand does not reflect quality," Journal of Health Economics, Elsevier, vol. 17(1), pages 1-19, January.
    2. Kathleen Carey, 2000. "Hospital Cost Containment and Length of Stay: An Econometric Analysis," Southern Economic Journal, John Wiley & Sons, vol. 67(2), pages 363-380, July.
    3. Elena Polverejan & Joseph C. Gardiner & Cathy J. Bradley & Margaret Holmes‐Rovner & David Rovner, 2003. "Estimating mean hospital cost as a function of length of stay and patient characteristics," Health Economics, John Wiley & Sons, Ltd., vol. 12(11), pages 935-947, November.
    4. Ma, Ching-to Albert & McGuire, Thomas G, 1997. "Optimal Health Insurance and Provider Payment," American Economic Review, American Economic Association, vol. 87(4), pages 685-704, September.
    5. 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. Rosella Levaggi & Marcello Montefiori, 2013. "Patient selection in a mixed oligopoly market for health care: the role of the soft budget constraint," International Review of Economics, Springer;Happiness Economics and Interpersonal Relations (HEIRS), vol. 60(1), pages 49-70, March.

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    More about this item

    Keywords

    Physician payments;

    JEL classification:

    • I11 - Health, Education, and Welfare - - Health - - - Analysis of Health Care Markets

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