Fee-for-service, Capitation and Health Provider Choice with Private Contracts

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Contracts between health insurers and providers are private; i.e. not public. By
modelling this explicitly, we find the following. Insurers with bigger provider networks,pay higher fee-for-service rates to providers. This makes it more likely that a patient is treated and hence health care costs increase with provider network size. Although providers are homogeneous, the welfare maximizing provider network can consist of two or more providers. Increasing transparency of provider prices increases welfare only if consumers can process the prices of all treatments involved in an insurance contract. If not, it tends to reduce welfare.
Original languageEnglish
Place of PublicationTilburg
Number of pages26
Publication statusPublished - 25 Oct 2014

Publication series

NameCentER Discussion Paper
NameTILEC Discussion Paper


  • private contracts
  • two-part tariffs
  • fee-for-service
  • capitation
  • any willing provider laws
  • price transparency


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