Pricing and Openness in Contracts for Health Care Services

2015

An important determinant of health system performance is contracting. Providers often respond to financial incentives, despite the ethical underpinnings of medicine, and payers can craft contracts to influence performance. Yet contracting is highly imperfect in both single-payer and multi-payer health systems. Arguably, in a competitive, multi-payer environment, contractual innovation may occur more rapidly than in a single-payer system. This innovation in contract design could enhance performance. However, contractual innovation often fails to improve performance as payer incentives are misaligned with public policy objectives. Numerous countries seek to improve healthcare contracts, but thus far no health system has demonstrably crafted the necessary blend of incentives to stimulate optimal contracting.

Management Accounting Research, 1996

(NHS) reforms introduced a market approach to the allocation of healthcare resources. The rules to be applied in pricing healthcare contracts , namely , full-cost pricing with no cross-subsidization , assume the model of purchasers shopping around to select the best buy. In this model , comparative prices which fairly reflect resource usage are required. Surveys in 1991 and 1994 and illustrative material from two healthcare providers are used to examine the premise that full-cost pricing can facilitate the achievement of productive ef ficiency in the NHS internal market. It was evident in the first year of the market , that prices were unreliable indicators of comparative ef ficiency. Inconsistent and crude costing approaches were used ; contract categories failed to adequately define the 'product' ; and block contracts predominated. The 1994 survey found that the level of consistency in costing for contracting had improved , but large variations in the application of the NHS Costing for Contracting Guidance existed. A mismatch is apparent between the rigid , full-cost pricing rules and the financial management considerations at local level. Incentives exist to cost shift and healthcare full-cost prices can easily be manipulated. The NHS Executive could seek to reduce accounting choice and rigidly enforce full-cost pricing rules , but such measures would be costly and may actually impede ef ficient cost management at local level without any assurity of an overall improvement in productive ef ficiency .

In this paper we propose a simple, market based mechanism to set prices in health care markets, namely a system where the patients are auctioned out to the hospitals. Our aim is to characterize principles as to how such an auction should be designed. In the case of elective treatment, health authorities thus organize a competition between hospitals. The hospital with the lowest price signs a contracts with authority (or the insurer) that commits him to treat a given number of patients within a predetermined period. However, this is not a simple mechanism that identi…es the hospital with the lowest treatment cost. Due to potentially rapid and unpredictable shifts in demand, treatment capacity may be hard to know in advance. There is always a risk that treatment must be canceled due to arrival of patients that require acute treatment. This calls for a market design that accounts for the risk of default. Our main result is that the expected cost for the government is reduced if the gov...

Two identical hospitals compete for patients and doctors choosing locations (e.g. specializations) on a Hotelling line, and selecting the quality of the treatment and the salary for the doctors. Patients pay the price chosen by a benevolent central planner. Introducing the presence of cross-group externalities for the patients (i.e. ceteris paribus patients prefer the hospital with the highest number of doctors), we show that in equilibrium hospitals always maximally differentiate their services. The regulator, choosing the price, can affect only the provision of quality that, in equilibrium, may be provided at the socially optimal level.

Health Economics, 1995

1998

Colleen M. Fiood Graduate Department of the Faculty of Law University of Toronto kuEmwt This dissertation compares managed competition and intemal market reform as proposed to be applied in the U.K.. New Zealand. the Netherlands. and the US. The goal is to detemine which mode1 is Iikely to most efficiently ensure access for al1 citizens to a cornprehensive range of health services. I conclude that the managed competition model is to be preferred as it harnesses both market and regulatory mechanisms to create conditions for optimal decision-making. The model also promises greater flexibility in responding to different and dynarnic health service markets. The problems with the managed competition mode1 are the dificulty of ensuring that private insurers compete on price and quality dimensions rather than on risk avoidance ("cream skirnming") and the existence of multiple purchasen within a system which may increase transactions costs. An interna1 market relies on monopsony government-appointed purchasers so as to avoid problems of cream skimming and transactions costs; however, these equally become problems in an intemal market as govemment purchasers move to contract on a capitation basis with small groups of providers offerïng managed care. Internal market reform focuses on a '-purchaser-provider split" requiring public and private providers to compete for supply contracts with govemment-appointed authorities. The key concem with the intemal market model is the lack of attention paid to the incentives operating upon these authorities. Moreover, in mandating contracting-out the mode1 makes no allowances for the different characteristics of health service markets. In al1 health care systems it is essential to design governance mechanisms so that dzcisionrnakers have the incentives, skills, and resources necessary to make decisions that, over time. strikes the right balance between patients' needs and societal interest and between equity and eficiency. Neither model addresses govemance issues sufficiently. However, the managed competition model offers the promise of tailoring market (exit), po litical (voice) and regulatory mechanisrns to create the optimal mix of incentives. Although preferable in theory, the rnanaged competition model has never been fully implemented in practice. Its complexity rneans there is a danger of piece-meal implementation which may result in an inferior alternative institutional arrangement to the status quo in any particular health care system. Heartfelt thanks first and foremost to rny supervisor. Professor Michael Trebilcock. who has been unflagging in his encouragement of me both in this work and al1 my other academic and professional efforts. His intellect and his kindness have enriched my life and I am forever grateful. Thank you to Professor Peter Coyte who provided constructive criticism of this work as it progressed. to Professor Bernard Dickens for his advice and comments. and to Professor Hudson Janisch who shepherded this dissertation past al l the administrative hoops. Thanks also to Julia Hall and Margo Hall, both of whom are busy administrators yet both of whom always have time to ask how things are going. Many thanks to the organizations that provided funded for my studies particularly the Faculty of Law and the SchooI of Graduate Studies in the University of Toronto, the John. F. Olin Fund, the New Zealand Federation of University Women, and the Spencer Mason Trust. Thank you to the many people who helped me obtain information regarding the systerns under study or who discussed issues with me particularly

University Economic Bulletin, Vol. 19, No. 1, 2024

Pricing is one of the components of ensuring competitive conditions in the market: it has its own specificity in the healthcare market, which is characterized by various forms of operation of enterprises, access to goods and services. The purpose of the study was to investigate the methods and approaches to this process in Ukraine, taking into account the peculiarities of the country’s development related to the full-scale invasion of the Russian Federation. The methods used in the study were formal and legal (to form logical links between individual regulatory documents) and comparison (to assess the specifics of pricing in the medical sector in different countries). The study assessed the pricing process as such and described the factors that influence it in practice in general and in the medical sector. It was also concluded that understanding the role of this process for both the state and potential clients is important, as it affects economic stability, quality of medical services, social justice. Particular attention was paid to such approaches as “cost+markup” and “market- based”. Based on the models built in this paper, it was concluded that these approaches should be used in symbiosis (to focus on both market conditions and the company’s goals for forming a margin). Attention was also paid to the Value-Based Pricing approach: it was concluded that it is inherently different from the other two approaches, as it requires much more complex estimates, since it is based on the expected utility of the created product. The study also highlighted the problem of non-transparent pricing as one of the main ones that prevents the formation of effective market conditions. The results obtained in the study can be used both to formulate public policy and to create strategies for individual companies in the Ukrainian market of medical goods and services

The Journal of Law and Economics, 1993

Public Administration Review, 2021

Policymakers now have four decades' experience using marketization to address cost and quality problems in public-sector health services. While much is known about the challenges, it is difficult to draw lessons because there remains no agreed-upon definition of marketization. This article contributes a definition that focuses on the transaction, particularly the effects of funding arrangements on the intensity of competition among providers. Based on prior literature and 106 interviews with practitioners and researchers in five countries, the authors contribute a systematization of 12 concrete market mechanisms enacting three market principles. Furthermore, the authors analyze respondents' perceptions of healthcare marketization's effects on costs and quality. While marketization is a multifaceted, sometimes ambiguous phenomenon requiring further research before definite conclusions can be reached, most statements from our respondents about cost and quality effects were negative. Evidence for Practice • Examining health systems in five countries, we identify 12 different market mechanisms, i.e. concrete procedural changes that stimulate competition among service providers. • While these mechanisms sometimes enable improvements in cost and quality, our respondents identified many more examples of markets driving up costs and compromising quality. • A substantial number of respondents also stated that effects were unclear. • More research is needed to assess the effects of market mechanisms in healthcare, for which the article's conceptualization and findings can serve as a basis.