We examine how public sector third-party purchasers and hospitals negotiate quality targets when a fixed proportion of hospital revenue is required to be linked to quality. We develop a bargaining model linking the number of quality targets to purchaser and hospital characteristics. Using data...

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...