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Contracting with sequential care providers.

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Financial incentives can improve care coordination by using mixed contracts. These contracts balance fixed budgets and cost-sharing to resolve inefficiencies in sequential provider care pathways.

Keywords:
CoordinationSemi-altruistic agentsSequential productionVertical relations

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Area of Science:

  • Health economics
  • Game theory
  • Healthcare management

Background:

  • Fragmented healthcare systems lead to high costs, low quality, and patient dissatisfaction.
  • Care coordination challenges arise when patients move between sequentially organized providers.

Purpose of the Study:

  • To analyze the impact of financial incentives (reimbursement schemes) on coordinated care.
  • To investigate how sequential provider organization and patient transfers affect care coordination.

Main Methods:

  • Game-theoretic framework applied to a three-provider model.
  • Analysis of cost-externalities and altruistic patient preferences.
  • Evaluation of activity-based versus cost-based contracts.

Main Results:

  • Activity-based contracts show efficient cost containment but inefficient quality provision due to misalignments and poor coordination.
  • Optimal mixed cost-based contracts involve fixed budgets, integrated penalties, and cost-sharing.
  • These mixed contracts resolve coordination inefficiencies, though internal provider inefficiency may persist.

Conclusions:

  • A production chain perspective favors cost-based contracts over prospective ones for improving care coordination.
  • Mixed contracts effectively address preference misalignments and coordination issues in sequential care.