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Xavier A, (2003)
‘Hospital Competition, GP Fundholders and Waiting Times in
the UK Internal Market: the Case of Elective Surgery’
International Journal of Health Care Finance & Economics 3, pp. 25-51
- A theoretical paper, aiming to model demand for and supply of NHS elective
surgery using a “modified Hotelling” framework.
- Xavier uses
a duopoly model in which two NHS hospitals are located at opposite
ends of a road. There are N potential patients, uniformly
distributed along this road, and 2 GPs, each of whom has half the patients
situated
at each point on the road.
- Fundholding is modelled by assuming that one
GP on ‘the road’ becomes
a GP fundholder (GPFH) while the other remains a cost-insensitive Health
Authority funded GP. The cost-sensitive GPFH is no longer a perfect agent
for his patients, as he takes referral cost as well as waiting times
into account when making decisions.
- GPFHs will pay a price for care that
exceeds hospital marginal cost.
- If GPFHs pay more than marginal costs, their patients will have zero
waiting time. (Because at any given level of supply, raising the price
paid by GPFH patients and decreasing waiting times leaves production
costs unchanged
but raises revenue, making the hospital better off.)
- Health Authorities
in Xavier’s model pay less for care than GPFHs,
and less than hospital marginal costs, but their patients face positive
waiting times.
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