Abstract:
This work develops a simple and comprehensive framework to improve the allocation of public resources to public and private hospitals from the standpoint of public hospital profitability in the presence of income inequalities. The paper illustrates the direct impacts that publicly-funded investments in capacity, the adoption of a public market share, the institution of punishments for insufficient supply and the provision of a stochastic reservation quality have on a public hospital's surplus. The presented framework fits well the enormous Brazilian health system and can be useful in other circumstances and countries where public and private hospitals coexist.