Using Subjective Risk Adjusting to Prevent Patient Dumping in the Health Care Industry

Posted: 29 Nov 1999

See all articles by Tracy R. Lewis

Tracy R. Lewis

Duke University, Fuqua School of Business-Economics Group; National Bureau of Economic Research (NBER); Duke University - Department of Economics; Duke Innovation & Entrepreneurship Initiative

David E. M. Sappington

University of Florida - Department of Economics; National Bureau of Economic Research (NBER)

Abstract

We examine how to procure health care services at minimum cost while preventing suppliers from refusing to care for high-cost patients. A single risk-adjusted prospective payment is optimal only when it is particularly costly for the supplier to discover likely treatment costs. Cost sharing is optimal when these screening costs are somewhat smaller. When screening costs are sufficiently small, screening is optimally accommodated and subjective risk adjusting is implemented. Under subjective risk adjusting, the supplier classifies patients according to his personal assessment of likely treatment costs, and payments are structured accordingly. Optimal procurement policies are contrasted with prevailing industry policies.

JEL Classification: I10, I18, D82

Suggested Citation

Lewis, Tracey R. and Sappington, David E. M., Using Subjective Risk Adjusting to Prevent Patient Dumping in the Health Care Industry. Journal of Economics and Management Strategy, Vol. 8, No. 3, 1999, Available at SSRN: https://ssrn.com/abstract=187951

Tracey R. Lewis

Duke University, Fuqua School of Business-Economics Group ( email )

Box 90097
Durham, NC 27708-0097
United States

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

Duke University - Department of Economics ( email )

213 Social Sciences Building
Box 90097
Durham, NC 27708-0204
United States

Duke Innovation & Entrepreneurship Initiative ( email )

215 Morris St., Suite 300
Durham, NC 27701
United States

David E. M. Sappington (Contact Author)

University of Florida - Department of Economics ( email )

224 Matherly Hall
Gainesville, FL 32611-7140
United States
352-392-3904 (Phone)
352-336-1420 (Fax)

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

Do you have a job opening that you would like to promote on SSRN?

Paper statistics

Abstract Views
747
PlumX Metrics