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Dynamic, incentive-compatible contracting for health services

Rosella Levaggi, Michele Moretto and Paolo Pertile

No 338404, FEEM Working Papers from Fondazione Eni Enrico Mattei (FEEM)

Abstract: This paper aims to characterise a dynamic, incentive-compatible contract for the provision of health services, allowing for both moral hazard and adverse selection. Patients’ severity changes over time following a stochastic process and is private information of the provider. We characterise the optimal dynamic contract and show that it is made up of two components: a time-invariant payment, which depends on the structural characteristics of the provider, and a time-varying component, which is affected by both patient and hospital characteristics. To illustrate the characteristics of the dynamic contract and compare it with a more standard static contract, we provide a numerical exercise calibrated with data from hip replacement hospitalisations in Italy.

Keywords: Health Economics and Policy; Research Methods/ Statistical Methods (search for similar items in EconPapers)
Pages: 39
Date: 2023-09-06
New Economics Papers: this item is included in nep-cta and nep-hea
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https://ageconsearch.umn.edu/record/338404/files/NDL2023-016.pdf (application/pdf)

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Persistent link: https://EconPapers.repec.org/RePEc:ags:feemwp:338404

DOI: 10.22004/ag.econ.338404

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