Specification of Financial Incentives for Quality in Health Care Contracts

We consider how purchasers and providers negotiate the quality element of contracts when the purchasers are required to link a fixed proportion of revenue to quality. A simple model predicts that the complexity of the quality element will depend on purchaser and provider characteristics. Using data extracted from 153 of the 169 contracts for acute hospital services in England in 2010/11, we find that the complexity of the quality element of the contract is determined by the type of provider, whether negotiation was passed to an agency, the regional contractual constraints and whether the provider had teaching status