Discussion Paper Series in Economics, Department of Economics, Norwegian School of Economics (NHH)
Optimal hospital payment rules under rationing by random waiting.
() and Fred Schroyen
Abstract: We derive optimal rules for paying hospitals in a public
health care system in which providers can choose quality and random patient
demand is rationed by waiting time. Since waiting time imposes real costs
on patients hospital payment rules should take account of their effect on
waiting time as well as on quality and the number of patients treated. We
develop a general stochastic model of rationing by waiting and use it to
derive welfare maximising payment to hospitals linked to output, expected
waiting times, quality, hospital capacity and length of stay. We show that,
although prospective output pricing gives hospitals an incentive to attract
patients by raising quality and reducing waiting times, it must be
supplemented by prices attached to other hospital decisions and outcomes
except under very strong assumptions about the welfare function, patient
preferences, and whether patients lose income whilst waiting.
Keywords: Rationing Waiting times; Queues; Prospective payment; Hospitals.; (follow links to similar papers)
JEL-Codes: D81; I11; I13; I18; L51; (follow links to similar papers)
51 pages, April 21, 2016
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