A frequent form of pay-for-performance programs increase reimbursement for all services by a certain percentage of the baseline price. We examine how such a ?bonus-for-quality? reimbursement scheme a¤ects the wage contract given to physicians by the hospital management. To this end, we determine the bonus inducing hospitals to incentivize their physicians to meet the quality standard. Additionally, we show that the health care payer has to complement the bonus with a (sometimes negative) block grant. We conclude the paper relating the role of the block grant to recent experiences in health care market.Paying-for-Performance; Quality; Hospital Financing
To submit an update or takedown request for this paper, please submit an Update/Correction/Removal Request.