Static and dynamic efficiency of irreversible health care investments under alternative payment rules

Rosella Levaggi, Michele Moretto and Paolo Pertile

Journal of Health Economics, 2012, vol. 31, issue 1, 169-179

Abstract: The paper studies the incentive for providers to invest in new health care technologies under alternative payment systems, when the patients’ benefits are uncertain. If the reimbursement by the purchaser includes both a variable (per patient) and a lump-sum component, efficiency can be ensured both in the timing of adoption (dynamic) and the intensity of use of the technology (static). If the second instrument is unavailable, a trade-off may emerge between static and dynamic efficiency. In this context, we also discuss how the regulator could use control of the level of uncertainty faced by the provider as an instrument to mitigate the trade-off between static and dynamic efficiency. Finally, we calibrate the model to study a specific technology and estimate the cost of a regulatory failure.

Keywords: Health care technologies; Dynamic efficiency; Static efficiency; Real options (search for similar items in EconPapers)
JEL-codes: D92 I18 (search for similar items in EconPapers)
Date: 2012
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Citations: View citations in EconPapers (17)

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Related works:
Working Paper: Static and Dynamic Efficiency of Irreversible Health Care Investments under Alternative Payment Rules (2010)
Working Paper: Static and Dynamic Efficiency of Irreversible Health Care Investments under Alternative Payment Rules (2010)
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Persistent link: https://EconPapers.repec.org/RePEc:eee:jhecon:v:31:y:2012:i:1:p:169-179

DOI: 10.1016/j.jhealeco.2011.09.005

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