Publicação
Investment and quality competition in healthcare markets
| Resumo: | We study the strategic relationship between hospital investment and provision of service quality. We use a spatial competition framework and allow investment and quality to be complements or substitutes in patient benefit and provider cost. We assume that each hospital commits to a certain investment before deciding on service quality, and that investment is observable and contractible while quality is observable but not contractible. We show that, under a fixed DRG-pricing system, providers’ lack of ability to commit to quality leads to under- or overinvestment, relative to the first-best solution. Underinvestment arises when the price-cost margin is positive, and quality and investments are strategic complements, which has implications for optimal contracting. Differently from the simultaneous-move case, the regulator must complement the payment with one more instrument to address under/overinvestment. We also analyse the welfare effects of different policy options (separate payment for investment, higher per-treatment prices, or DRG-refinement policies). |
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| Autores principais: | Ghandour, Ziad |
| Outros Autores: | Siciliani, Luigi; Straume, Odd Rune |
| Assunto: | Hospital payment Investment Quality competition |
| Ano: | 2022 |
| País: | Portugal |
| Tipo de documento: | artigo |
| Tipo de acesso: | acesso aberto |
| Instituição associada: | Universidade do Minho |
| Idioma: | inglês |
| Origem: | RepositóriUM - Universidade do Minho |
| Resumo: | We study the strategic relationship between hospital investment and provision of service quality. We use a spatial competition framework and allow investment and quality to be complements or substitutes in patient benefit and provider cost. We assume that each hospital commits to a certain investment before deciding on service quality, and that investment is observable and contractible while quality is observable but not contractible. We show that, under a fixed DRG-pricing system, providers’ lack of ability to commit to quality leads to under- or overinvestment, relative to the first-best solution. Underinvestment arises when the price-cost margin is positive, and quality and investments are strategic complements, which has implications for optimal contracting. Differently from the simultaneous-move case, the regulator must complement the payment with one more instrument to address under/overinvestment. We also analyse the welfare effects of different policy options (separate payment for investment, higher per-treatment prices, or DRG-refinement policies). |
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