Journal article

Cream skimming: Theory and evidence from hospital transfers and capacity utilization

O Yang, MK Chan, TC Cheng, J Yong

Journal of Economic Behavior and Organization | Elsevier | Published : 2020


The paper examines cream skimming behaviour by studying hospital transfers in a mixed public-private hospital system. A key innovation is the use of capacity utilization to identify cream skimming. We develop a dynamic model with uncertain patient arrivals and hospital capacity constraints to clarify the conditions under which a profit maximizing hospital will engage in patient selection by transferring ‘hard’ patients—those with severe/complex conditions—to free up capacity to accommodate ‘easy’ patients with few severe/complex conditions. Given finite capacity, public hospitals are strictly less likely to transfer patients than profit-motivated private hospitals at the same level of capaci..

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Awarded by NHMRC Partnership Grant

Funding Acknowledgements

This research was funded by an NHMRC Partnership Grant (Grant ID: 567217) and in collaboration with the Victorian Department of Health and Human Services (formerly the Victorian Department of Health). The views expressed herein are those of the authors and do not necessarily reflect the views of the Victorian Department of Health.