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Using auctions for contracting with hospitals when quality matters
Michel Mougeot1, Florence Naegelen
1CRESE, UFR SJEPG, University of Besançon, 25030 Besançon, France. michel.mougeot@univ-fcomte.fr
International Journal of Health Care Finance and Economics
|November 25, 2003
Summary
Regulators can improve healthcare by strategically decreasing service quality to reduce information rents. Auctions for hospital services can lead to better quality and lower costs compared to monopolies.
Area of Science:
- Health economics
- Information economics
- Public policy
Background:
- Healthcare contracting often involves asymmetric information between regulators and hospitals.
- Patient demand for healthcare services is sensitive to the quality of care provided.
Purpose of the Study:
- To analyze optimal contracting policies for healthcare services with hidden information.
- To investigate the role of auctions in improving healthcare quality and reducing costs.
Main Methods:
- Characterization of optimal policy for a single hospital under hidden information.
- Analysis of optimal auction design and first-score tendering procedures.
- Modeling of a regulator reimbursing a unit price per patient.
Main Results:
- Decreasing quality can effectively reduce the information rent for the regulator.
- Optimal auctions can implement policies that increase expected healthcare quality.
- Auctions lead to lower expected payments compared to monopoly provision.
Conclusions:
- Information asymmetry in healthcare contracting can be managed through strategic quality adjustments.
- Auctions represent a viable mechanism for enhancing healthcare service quality and efficiency.
- Regulated healthcare markets can achieve superior outcomes through well-designed competitive bidding processes.
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