Working Paper: CEPR ID: DP9915
Authors: Sren Rud Kristensen; Luigi Siciliani; Matt Sutton
Abstract: The increased availability of process measures implies that quality of care is in some areas de facto verifiable. Optimal price-setting for verifiable quality is well-described in the incentive-design literature. We seek to narrow the large gap between actual price-setting behaviour in Pay-For-Performance schemes and the incentive literature. We present a model for setting prices for process measures of quality and show that optimal prices should reflect the marginal benefit of health gains, providers? altruism and the opportunity cost of public funds. We derive optimal prices for processes incentivised in the Best Practice Tariffs for emergency stroke care in the English National Health Service. Based on published estimates, we compare these to the prices set by the English Department of Health. We find that actual tariffs were lower than optimal, relied on an implausibly high level of altruism, or implied a lower social value of health gains than previously used.
Keywords: optimal pricesetting; pay for performance; provider behaviour
JEL Codes: D82; I11; I18; L51
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| Optimal prices for process measures in P4P schemes (J33) | improved health outcomes (I14) |
| inadequate pricing (D49) | lower quality care (I14) |
| overestimated altruism (D64) | compromised pricing model effectiveness (D43) |