Antitrust & Competition Policy Blog

Editor: D. Daniel Sokol
University of Florida
Levin College of Law

A Member of the Law Professor Blogs Network

Thursday, October 28, 2010

Health Care Providers Payments Regulation when Horizontal and Vertical Differentiation Matter

Posted by D. Daniel Sokol

David Bardey (Ecole Polytechnique de Paris, Toulouse School of Economics (GREMAQ) and University of Rosario (Bogota)), Chiara Canta (Toulouse School of Economics (GREMAQ)) and Jean-Marie Lozachmeur (Toulouse School of Economics (IDEI and GREMAQ-CNRS)) discuss Health Care Providers Payments Regulation when Horizontal and Vertical Differentiation Matter.

ABSTRACT: This paper analyzes the regulation of payment schemes for health care providers competing in both quality and product differentiation of their services. The regulator uses two instruments: a prospective payment per patient and a cost reimbursement rate. When the regulator can only use a prospective payment, the optimal price involves a trade-off between the level of quality provision and the level of horizontal differentiation. If this pure prospective payment leads to underprovision of quality and overdifferentiation, a mixed reimbursement scheme allows the regulator to improve the allocation efficiency. This is true for a relatively low level of patients’transportation costs. We also show that if the regulator cannot commit to the level of the cost reimbursement rate, the resulting allocation can dominate the one with full commitment. In particular, some cost reimbursement might be optimal even for higher levels of t! ransportation costs.

http://lawprofessors.typepad.com/antitrustprof_blog/2010/10/health-care-providers-payments-regulation-when-horizontal-and-vertical-differentiation-matter.html

| Permalink

TrackBack URL for this entry:

http://www.typepad.com/services/trackback/6a00d8341bfae553ef0133f4e76717970b

Listed below are links to weblogs that reference Health Care Providers Payments Regulation when Horizontal and Vertical Differentiation Matter:

Comments

Post a comment