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The optimal payment system for hospitals under adverse selection, moral hazard, and limited liability

François Maréchal () and Lionel Thomas ()
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François Maréchal: Université de Bourgogne Franche-Comté, CRESE
Lionel Thomas: Université de Bourgogne Franche-Comté, CRESE

No 2019-04, Working Papers from CRESE

Abstract: This paper studies the optimal contract offered by a regulator to a partially altruistic hospital under adverse selection, moral hazard, and limited liability. We consider that the hospital privately observes the severity of illness of patients and chooses a hidden quality that influences the probability of some complications or comorbidities (CCs) occurring. We analyze the conditions under which the payment, for a given diagnosis Related Group, should be refined according to the severity of illness and the occurrence of CCs.

Pages: 33 pages
Date: 2019-05
New Economics Papers: this item is included in nep-hea and nep-reg
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