Static and Dynamic Efficiency of Irreversible Health Care Investments Under Alternative Payment Rules

28 Pages Posted: 19 Jul 2010

See all articles by Rosella Levaggi

Rosella Levaggi

University of Brescia - Department of Economics and Management

Michele Moretto

University of Padua, Dep of Economics and Management

Paolo Pertile

University of Verona - Department of Economics

Multiple version iconThere are 2 versions of this paper

Date Written: July 16, 2010

Abstract

The paper studies the incentive for providers to invest in new health care technologies under alternative payment systems, when the patients' benefits are uncertain. If the reimbursement by the purchaser includes both a variable (per patient) and a lump-sum component, efficiency can be ensured both in the timing of adoption (dynamic) and the intensity of use of the technology (static). If the second instrument is unavailable, a trade-off may emerge between static and dynamic efficiency. In this context, we also discuss how the regulator could use the control of the level of uncertainty faced by the provider as an instrument to mitigate the trade-off between static and dynamic efficiency. Finally, the model is calibrated to study a specific technology.

Keywords: Health Care Technologies, Dynamic Efficiency, Static Efficiency, Real Options

JEL Classification: L18, D81

Suggested Citation

Levaggi, Rosella and Moretto, Michele and Pertile, Paolo, Static and Dynamic Efficiency of Irreversible Health Care Investments Under Alternative Payment Rules (July 16, 2010). Available at SSRN: https://ssrn.com/abstract=1641051 or http://dx.doi.org/10.2139/ssrn.1641051

Rosella Levaggi (Contact Author)

University of Brescia - Department of Economics and Management ( email )

Via San Faustino 74B
Brescia, 25122
Italy
+39 03 0298 8825 (Phone)
+39 03 0298 8837 (Fax)

HOME PAGE: http://www.eco.unibs.it/segdse/rlev/index.htm

Michele Moretto

University of Padua, Dep of Economics and Management ( email )

via Del Santo 33
Padova, 35123
Italy
+39 049 8274265 (Phone)
+39 049 8274211 (Fax)

Paolo Pertile

University of Verona - Department of Economics ( email )

Via dell'Artigliere, 8
Verona, 37129
Italy

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