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Price Adjustment in the Hospital Sector : How should the NHS discriminate between providers. A Comment on Miraldo, Siciliani and Street

Miraldo et al. (2011) have analyzed the price adjustment policy of a payer implementing a Prospective Payment System in the hospital sector in the presence of exogenous cost differences when no lump-sum transfers are allowed. They focus on deriving conditions for the price adjustment being positive. In this paper, using a result of Miraldo et al., we emphasize whether the price adjustment is larger or smaller than the marginal cost. We show how the discrimination operates against either the low-cost or the high-cost hospitals according to the value of the elasticity of the additional marginal cost with respect to the quantity of services.
Journal of Health Economics, 31/1, 319-322
JEL : I11 ; I18 ; D4