Score contribution per author:
α: calibrated so average coauthorship-adjusted count equals average raw count
This note analyzes the incentives for cost reduction that different payment policies provide to profit‐maximizing health‐care providers. Ching‐to Albert Ma (1994) proposes a reimbursement mechanism that seeks to induce first‐best cost reduction by using a combination of cost reimbursement and prospective payment in a model where higher effort on the part of the health‐care provider reduces treatment costs. This note shows that a mechanism of this type, generally, will not result in first‐best cost reduction. However, such a mechanism is optimal when the payer has efficiency and distributional concerns.