Fixed price contracts: the case of pediatric acute lymphoblastic leukemia

This paper describes a new type of hospital contract. It is a contract made with payers and represents an attempt to tackle the issues of cost-containment, physicians' dissatisfaction with control over their practise, cost-effective care and quality of care. The case chosen for this attempt is pediatric acute lymphoblastic leukemia. The basis for setting the price of treatment is the division of the illness into episodes of care that correspond to medical events. There is a fixed fee schedule for each episode, and this fee schedule covers all the expenditures incurred during the episode. The fee schedule is fixed at the onset of the disease and depends solely on medical risk factors. Physicians can use the combination of resources they consider best for their patients and hospital management must find a cost-effective way to provide the required care. The advantage to patients is that they no longer have to obtain payers' agreement but receive state-of-the-art treatment in a teaching hospital.