Using Subjective Risk Adjusting To Prevent Patient Dumping In The Health Care Industry
Tracy R. Lewis
Duke University, Fuqua School of Business-Economics Group; National Bureau of Economic Research (NBER); Duke University - Department of Economics
David E.M. Sappington
University of Florida - Warrington College of Business Administration - Department of Economics; National Bureau of Economic Research (NBER)
Journal of Economics and Management Strategy, Vol. 8, No. 3, 1999
We examine how to procure health care services at minimum cost while preventing suppliers from refusing to care for high-cost patients. A single risk-adjusted prospective payment is optimal only when it is particularly costly for the supplier to discover likely treatment costs. Cost sharing is optimal when these screening costs are somewhat smaller. When screening costs are sufficiently small, screening is optimally accommodated and subjective risk adjusting is implemented. Under subjective risk adjusting, the supplier classifies patients according to his personal assessment of likely treatment costs, and payments are structured accordingly. Optimal procurement policies are contrasted with prevailing industry policies.
JEL Classification: I10, I18, D82Accepted Paper Series
Date posted: November 29, 1999
© 2013 Social Science Electronic Publishing, Inc. All Rights Reserved.
This page was processed by apollo3 in 0.673 seconds