CONTRACTING FOR HEALTH-SERVICES WITH UNMONITORED QUALITY

In both the NHS and Medicare, recent emphasis has been on contracts wi th payment based only on the number of patients treated. It is shown t hat, without direct monitoring of quality or effort to reduce costs, s uch contracts are efficient only when it is efficient to treat all pat ients wanting treatment. It may not be when treatment costs are insure d or subsidised. Such contracts can then be improved by including paym ents for the number of patients wanting treatment, as well as for the number actually treated. Even then, the outcome will not generally be efficient if quality is multi-dimensional.