Abstract
An important determinant of health system performance is contracting. Providers often respond to financial incentives, despite the ethical underpinnings of medicine, and payers can craft contracts to influence performance. Yet contracting is highly imperfect in both single-payer and multi-payer health systems. Arguably, in a competitive, multi-payer environment, contractual innovation may occur more rapidly than in a single-payer system. This innovation in contract design could enhance performance. However, contractual innovation often fails to improve performance as payer incentives are misaligned with public policy objectives. Numerous countries seek to improve healthcare contracts, but thus far no health system has demonstrably crafted the necessary blend of incentives to stimulate optimal contracting.
Highlights
Health systems can be conceptualised as a mesh of interlinked, interdependent markets
Each market involves supply and demand. Given this diverse array of market forces, Professor Goddard duly notes that the real issue is not whether competition should exist in healthcare, but rather to identify the particular circumstances and forms in which competition can exert beneficial effects
Healthcare contracts seek to specify the characteristics of service provision and the level of reimbursement
Summary
Health systems can be conceptualised as a mesh of interlinked, interdependent markets. Governments play some role in healthcare financing and provision, while even in state provision countries (eg, National Health Service [NHS] in the United Kingdom) payment per patient exists and some competition is present.
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