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Health provider networks, quality and costs

Author

Listed:
  • Jan Boone

    (Department of Economics, University of Tilburg)

  • Christoph Schottmüller

    (Department of Economics, University of Copenhagen)

Abstract
We provide a modeling framework to think about selective contracting in the health care sector. Two health care providers differ in quality and costs. When buying health insurance, consumers observe neither provider quality nor costs. We derive an equilibrium where health insurers signal provider quality through their choice of provider network. Selective contracting focuses on low cost providers. Contracting both providers signals high quality. Market power tends to lower quality and lead to inefficiency. In a dynamic extension of the model, providers under-invest in quality while there can be both over and under-investment in cost reductions if there is a monopoly insurer while an efficient investment equilibrium exists with insurer competition.

Suggested Citation

  • Jan Boone & Christoph Schottmüller, 2015. "Health provider networks, quality and costs," Discussion Papers 15-02, University of Copenhagen. Department of Economics.
    • Handle: RePEc:kud:kuiedp:1502
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    File URL: http://www.econ.ku.dk/english/research/publications/wp/dp_2015/1502.pdf
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    References listed on IDEAS

    as
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    Cited by:

    1. Boone, Jan & Douven, Rudy, 2014. "Provider competition and over-utilization in health care," CEPR Discussion Papers 10177, C.E.P.R. Discussion Papers.
    2. Boone, J. & Douven, R.C.M.H., 2014. "Provider Competition and Over-Utilization in Health Care," Other publications TiSEM 56362c38-f32c-45b9-93fc-1, Tilburg University, School of Economics and Management.

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    More about this item

    Keywords

    selective contracting; exclusive contracts; common contracts; managed care; health care quality; signaling;
    All these keywords.

    JEL classification:

    • I11 - Health, Education, and Welfare - - Health - - - Analysis of Health Care Markets
    • L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets

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