Hospital Competition under Regulated Prices: Application to Urban Health Sector Reforms in China

Karen Eggleston and Chi-Man (Winnie) Yip

No 401, Discussion Papers Series, Department of Economics, Tufts University from Department of Economics, Tufts University

Abstract: We develop a model of public-private hospital competition un- der regulated prices, recognizing that hospitals are multi-service Þrms and that equilibria depend on the interactions of patients, hospital administrators, and physicians. We then use data from China to calibrate a simulation model of the impact of China?s recent payment and organizational reforms on cost, quality and access. Both the analytic and simulation results show how provid- ing implicit insurance through distorted prices leads to over/under use of services by proÞtability, which in turn fuels cost escalation and reduces access for those who cannot a?ord to self-pay for care. Hospital competition for patients will improve social welfare only if policymakers pay careful attention to payment incentives and regulation.

JEL-codes: I11 (search for similar items in EconPapers)
Date: 2004
New Economics Papers: this item is included in nep-edu, nep-hea and nep-tra
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Citations: View citations in EconPapers (26)

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