Health Care Providers Payments Regulation when Horizontal and Vertical Differentiation Matter

Bardey, David, Canta, Chiara and Lozachmeur, Jean-Marie (2010) Health Care Providers Payments Regulation when Horizontal and Vertical Differentiation Matter. TSE Working Paper, n. 10-164

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Official URL: http://tse-fr.eu/pub/22781

Abstract

This paper analyzes the regulation of payment schemes for health care providers competing in both quality and product differentiation of their services. The regulator uses two instruments: a prospective payment per patient and a cost reimbursement rate. When the regulator can only use
a prospective payment, the optimal price involves a trade-off between the level of quality provision and the level of horizontal differentiation. If this pure prospective payment leads to underprovision of quality and overdifferentiation, a mixed reimbursement scheme allows the regulator to improve
the allocation efficiency. This is true for a relatively low level of patients’transportation costs. We also show that if the regulator cannot commit to the level of the cost reimbursement rate, the resulting allocation can dominate the one with full commitment. In particular, some cost reimbursement might be optimal even for higher levels of transportation costs.

Item Type: Monograph (Working Paper)
Language: English
Date: March 2010
JEL codes: I18 - Government Policy; Regulation; Public Health
L51 - Economics of Regulation
Subjects: B- ECONOMIE ET FINANCE
Divisions: TSE-R (Toulouse)
Site: UT1
Date Deposited: 18 Jan 2012 06:03
Last Modified: 07 Mar 2018 13:22
OAI ID: oai:tse-fr.eu:22781
URI: http://publications.ut-capitole.fr/id/eprint/3527

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