An empirical investigation of procurement contract structures.
This article presents a model of procurement contracting with asymmetric cost information and investigates whether two of the model's predictions are consistent with actual contracts between hospitals and California's Medicaid program. The article first tests for the presence of a fixed-price payment region where Medicaid's payments are independent of hospitals' actual (but unobservable) production costs and then tests whether the size of the fixed-price region depends upon expectations about hospitals' costs. To conduct these tests, the article must first estimate hospitals' "unobservable" costs attributable to Medicaid patients. The article finds evidence of a fixed-price region but cannot confirm that the size of the fixed-price region depends upon expectations about hospitals' costs.
U.S. Department of Justice.
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D016363:Antitrust Laws / Q000191:economics; D002140:California; D002391:Catchment Area, Health / Q000191:economics; D003284:Contract Services / Q000191:economics*; D003625:Data Collection; D004465:Economic Competition / Q000706:statistics & numerical data; D004469:Economics, Hospital / Q000706:statistics & numerical data*; D005544:Forecasting / Q000379:methods; D017722:Hospital Charges; D017721:Hospital Costs / Q000706:statistics & numerical data*; D016014:Linear Models; D008484:Medicaid / Q000458:organization & administration*; D011907:Rate Setting and Review / Q000706:statistics & numerical data; D012051:Reimbursement Mechanisms; D013221:State Health Plans / Q000191:economics; D014481:United States