Hospital care organisation in Italy: a theoretical assessment of the reform

In Italy, a substantial proportion of health care is financed by the public sector; our history of high deficit and debt means that the objective to rationalise and control expenditure has become a priority for any effective government policy. The health care system has been widely reformed and a separation between purchasing and delivering the service has been enforced to mimic the structure of a competitive market. The organisation of the reformed internal market can however vary among regions in Italy. The aim of this paper is to assess the relative merits of the different form of organisations for secondary care in the context of the Italian health system. We will start from a review of the reformed Italian system and model the internal market for secondary health care in a context where information is symmetric. In the second part of the paper we allow for asymmetry of information, i.e. we assume that the hospitals might observe characteristics of the patients before setting their effort.