Price adjustment in the hospital sector

Marisa Miraldo, Luigi Siciliani and Andrew Street

Journal of Health Economics, 2011, vol. 30, issue 1, 112-125

Abstract: Abstract We analyse the properties of optimal price adjustment to hospitals when no lump-sum transfers are allowed and when prices differ to reflect observable exogenous differences in costs. We find that: (a) when the marginal benefit from treatment is decreasing and the cost function is the power function, price adjustment for hospitals with higher costs is positive but partial; if the marginal benefit is constant, the price is identical across providers; (b) if the cost function is exponential or it is separable in monetary and non-monetary costs (and linear in monetary costs), price adjustment is positive even when the marginal benefit is constant; (c) higher inequality aversion of the purchaser increases concentration in prices and lowers concentration in quantities; (d) if some dimensions of costs are private information, a higher correlation between the observable and unobservable cost component increases the optimal price for providers whose observable costs are above the average.

Keywords: Price; adjustment; Hospitals; DRGs (search for similar items in EconPapers)
Date: 2011
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Citations: View citations in EconPapers (18)

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Related works:
Working Paper: Price Adjustment in the Hospital Sector (2008)
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Persistent link: https://EconPapers.repec.org/RePEc:eee:jhecon:v:30:y:2011:i:1:p:112-125

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