Industrial Organization of Health Care Markets. Abstract, Executive Summary andFinal Report

摘要

The results of the project are included in three different studies. The firststudy demonstrates that the stochastic nature of the demand for medical services combined with the lumpiness of investment decisions may give rise to excessive investment when multiple hospitals select independently their levels of capacities. The second study shows that when a payer can dictate to the provider what type of treatment to administer to the patient it is possible to implement the 'first best' levels of investment in cost control efforts and in aggressiveness of treatment. Implementation of the 'first best' requires that the payer utilizes the prospective reimbursement rule accompanied with the removal of all malpractice liabilities from the provider. The third study considers a model of quality competition among health care providers and demonstrates that the equilibrium in the market is characterized by strict differentiation in the quality of care that is offered to consumers. The market outcome generates excessive investment in quality in comparison to the socially optimal outcome and, as a result, an excessive number of low income individuals who find health care unaffordable.