Journal of health economics
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This paper analyses contracts to keep down costs while maintaining quality of health services when patient demand does not reflect quality. There is then a natural role for forms of contract that have emerged during the reforms of the NHS in Britain that differ from pure fixed price or cost reimbursement contracts. ⋯ With fully benevolent providers there are roles for block and cost and volume contracts. With partially benevolent providers, some degree of cost sharing is typically optimal.