Optimal Healthcare Contracts: Theory and Empirical Evidence from Italy
57 Pages Posted: 11 Dec 2018
Date Written: December 2018
In this paper we investigate the nature of the contracts between a large health-care purchaser and health service providers in a prospective payment system. We model theoretically the interaction between patients choice and cream-skimming by hospitals. We test the model using a very large and detailed administrative dataset for the largest region in Italy. In line with our theoretical results, we show that the state funded purchaser offers providers a system of incentives such that the most efficient providers both treat more patients and also treat more difficult patients, thus receiving a higher average payment per treatment.
Keywords: Cream skimming, Hospitals, Lombardy, Optimal healthcare contracts, Patients choice
JEL Classification: D82, H42, I11, I18
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