The effects of hospitals’ governance on optimal contracts: Bargaining vs. contracting

We propose a two-stage model to study the impact of different hospitals’ governance frameworks on the optimal contracts designed by third-party payers when patients’ disease severity is the private information of the hospital. In the second stage, doctors and managers interact within either a bargai...

Full description

Saved in:
Bibliographic Details
Published in:Journal of health economics 2011-03, Vol.30 (2), p.408-424
Main Authors: Galizzi, Matteo M., Miraldo, Marisa
Format: Article
Language:English
Subjects:
Asymmetric information
Bargaining
Confidentiality
Contract management
Contract Services - economics
Contracting
Contracts
Contracts - economics
Cost of capital
Doctors
Equilibrium
Health administration
Health economics
Hospital Administration
Hospital Administrators
Hospitals
Humans
Insurance, Health, Reimbursement
Interprofessional Relations
Medical Staff, Hospital
Models, Organizational
Negotiating
Optimal contracts
Payment systems
Payments
Physicians
Severity of Illness Index
Strategic bargaining
Strategic bargaining Optimal contracts Hospitals Asymmetric information
Studies
Citations: Items that this one cites
Items that cite this one
Online Access:Get full text
Tags: Add Tag
No Tags, Be the first to tag this record!
Description
Summary:We propose a two-stage model to study the impact of different hospitals’ governance frameworks on the optimal contracts designed by third-party payers when patients’ disease severity is the private information of the hospital. In the second stage, doctors and managers interact within either a bargaining or a contracting scenario. In the contracting scenario, managers offer a contract that determines the payment to doctors, and doctors decide how many patients to treat. In the bargaining scenario, doctors and managers strategically negotiate on both the payment to doctors and the number of patients to treat. We derive the equilibrium doctors’ payments and number of treated patients under both scenarios. We then derive the optimal contract offered by the government to the hospital in the first stage. Results show that when the cost of capital is sufficiently low, the informational rent is lower, and the social welfare is higher, in the contracting scenario.
ISSN:0167-6296
1879-1646
DOI:10.1016/j.jhealeco.2010.12.001