Provider competition and over-utilization in health care

Jan Boone and Rudy Douven

No 10177, CEPR Discussion Papers from C.E.P.R. Discussion Papers

Abstract: This paper compares the welfare effects of three ways in which health care can be organized: no competition (NC), competition for the market (CfM) and competition on the market (CoM) where the payer offers the optimal contract to providers in each case. We argue that each of these can be optimal depending on the contracting environment of a speciality. In particular, CfM is optimal in a clinical situation where the payer either has contractible information on provider quality or can enforce cost efficient protocols. If such contractible information is not available NC or CoM can be optimal depending on whether patients react to decentralized information on quality differences between providers and whether payer's and patients' preferences are aligned.

Keywords: Competition; Health care; Selective contracting; Over-utilization; Mechanism design (search for similar items in EconPapers)
JEL-codes: D82 I11 L5 (search for similar items in EconPapers)
Date: 2014-09
New Economics Papers: this item is included in nep-com
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Citations: View citations in EconPapers (2)

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