DP13357 Optimal Healthcare Contracts: Theory and Empirical Evidence from Italy

Author(s):	Paolo Berta, Gianni De Fraja, Stefano Verzillo
Publication Date:	December 2018
Date Revised:	December 2018
Keyword(s):	Cream skimming, Hospitals, Lombardy, Optimal healthcare contracts, Patients choice
JEL(s):	D82, H42, I11, I18
Programme Areas:	Public Economics
Link to this Page:	cepr.org/active/publications/discussion_papers/dp.php?dpno=13357

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.