The payment of hospital services: a waiting lists model

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. 1. Introduction. The last two decades have witnessed major changes in the organisation of health services. Various factors, among which the aging of the population and technical progress, led to growing demand levels and expectations; then to discontent, cost increases and general financial crisis. In general terms this scenario has characterised