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Abstract:
Standard economic models of contract imply that contracts should be highly "complex," by which we mean (1) rich in the expected number of payoff-relevant contingencies; (2) variable in the magnitude of payoffs contracted to flow between parties; and (3) severe in the cognitive load necessary to understand the contract. Yet most real-world contracts are simple along all three of these dimensions. We argue that many factors, often neglected in the literature, account for this discrepancy. The factors are categorized as asymmetric information, monitoring dynamics, evolutionary pressures, conventions, reliance on trust and reputation, enforcement costs, bounded rationality, and renegotiation. This positive analysis has normative implications for how lawyers draft contracts, and for how courts rely on the form of a contract (specifically, its degree of complexity) in order to interpret it.

Abstract:
The authors report the results of a review of the Chinese-language and English-language literatures on service delivery in China, asking how well China's health care providers perform, what determines their performance, and how the government can improve it. They find current performance leaves room for improvement in terms of quality, responsiveness to patients, efficiency, cost escalation, and equity. The literature suggests that these problems will not be solved by simply shifting ownership to the private sector, or by simply encouraging providers - public and private - to compete with one another for individual patients. In contrast, substantial improvements could be (and in some places have already been) made by changing the way providers are paid-shifting away from fee-for-service and the distorted price schedule toward prospective payments. Active purchasing by insurers could further improve outcomes.

Health Monitoring & Evaluation, Health Law, Health Economics & Finance, Health Systems Development & Reform, Population Policies

Abstract:
We apply meta-analytic methods to conduct a quantitative review of the empirical literature since 1990 comparing financial performance of US for-profit, not-for-profit, and government-owned general acute hospitals. We find that the diverse results in the hospital ownership literature can be explained largely by differences in authors` underlying theoretical frameworks, assumptions about the functional form of the dependent variables, and model specifications. Weaker methods and functional forms tend to predict larger differences in financial performance between not-for-profits and for-profits. The combined estimates across studies suggest little difference in cost among all three types of hospital ownership, and that for-profit hospitals generate more revenue and greater profits than not-for-profit hospitals, although the difference is only of modest economic significance. There is little difference in revenue or profits between government and not-for-profit hospitals.

Abstract:
Does quality of care systematically differ among government-owned, private not-for-profit, and for-profit hospitals? A large empirical literature provides conflicting evidence. Through quantitative review of 46 studies since 1990, we find that several study features that can explain divergent results: analytic methods, disease studied, and data sources. For unprofitable care, how studies handle market competition and regional differences account for substantial variation. Policymakers should be aware that differences in results appear to arise predominantly from differences between studies’ analytic methods. Moreover, conventional methods of meta-analytic synthesis should be applied with great caution given the considerable overlap among studied hospitals.

Abstract:
Given an increasingly complex web of financial pressures on providers, studies have examined how the hospitals' overall financial health affect different aspects of hospital operation. In our study, we analyze this issue focusing on hospital access and quality by introducing an important aspect of the financial incentives, soft budget constraints (SBC), that takes into account both hospital's current and past financial health as well as their expected financial outlook (i.e., whether there is a sponsoring organization to bail them out). We develop a conceptual framework of SBC by considering the resultant incentives on cost control and quality improvement innovations; and examine the effect of SBC on the following aspects of access and quality: safety net service survival and AMI mortality rates. We find that hospitals with softer budget constraints are less likely to shut down safety net services. In addition, hospitals with softer budget constraints appear to have better mortality outcomes, suggesting that the reduced incentive to engage in cost control innovation as the result of SBC outweighs the dampening effect of quality improvement innovation.

Abstract:
Capitation gives insurers incentive to manipulate their offerings to attract the healthy and deter the sick. We calculate the incentives for such service-specific quality distortions using managed care medical and pharmacy spending data for fiscal years 2001 and 2002 from the Massachusetts State Employee Insurance Program. Services most vulnerable to stinting are cardiac care, diabetes care, and mental health and substance abuse services. Empirically, the financial temptation to distort service quality increases nonlinearly with supply-side cost sharing. Our empirical results highlight how selection incentives work at cross-purposes with efforts to reward excellent chronic disease management. Initiatives coupling pay-for-performance with risk adjustment and mixed payment hold promise for aligning incentives with quality improvement.

Abstract:
This research contributes to the literature on the value of health spending by estimating quality-adjusted price indices for treatment of patients with diabetes. We analyze rich data on patient outcomes and actual transaction prices for a sample of 735 patients identified in a large electronic diabetes management database (classified as type 1, type 2, or indeterminate type diabetes). To assure we capture all medical spending, we focus on employees or dependents of a large health care employer in the Midwestern United States (18 years or older) continuously enrolled in a self-insured health plan from 1997 to 2005 or to date of death.

Measures of patient outcomes include HbA1c, cardiovascular risks using the UK Prospective Diabetes Study equation, and mortality. To disentangle quality changes attributable to medical care from those associated with aging, we age-adjust the quality measures. Actual transactions prices represent direct medical spending for all medical care, including pharmaceuticals.

Because time since onset is a documented risk factor for complications, we structure the analysis so that we can document whether improved medical care has slowed the rate of progression of the disease. To minimize bias toward the sicker patients who receive more frequent tests, we define 3-year windows and use the last outcome measure for each window.

We find that patient outcomes have improved and spending has increased substantially over the nine year period. The percent of patients with HbA1c below 7, for example, increased across almost all diagnosis cohorts, so that by the 2003-2005 period, patients exhibiting this level of control ranged from 50% (of patients diagnosed before 1985) to 72% (of those diagnosed after 2000). Median annual spending increased 28% for those diagnosed before 1985, 76% for patients diagnosed between 1985 and 1996, and almost 4-fold for patients diagnosed during the 1997-99 period. Whether quality-adjusted prices have been increasing or not depends on the value of quality improvements. We estimate quality-adjusted price indices using techniques previously developed for treatment of heart attacks and depression (Cutler et al. 1998, Berndt et al. 2002), controlling for patient baseline severity, age and years since diagnosis.

productivity, Diabetes, price indices, value for money, chronic disease management

Abstract:
This article presents a model of the important health-policy dilemmas of risk selection and moral hazard. When providers can increase revenues by selecting favorable risks, capitation or purely prospective payment is unlikely to be optimal. A second best payment system may involve mixed levels of both demand- and supply-side cost sharing: consumers may prefer to pay deductibles and co-payments rather than to have their healthcare providers receive large financial rewards for skimping on care or discriminating against expensive-to-treat patients. Risk adjustment can improve the terms of the social trade-off between inefficient utilization and inequitable coverage. The role of professional ethics is also considered.