A note on the trade‐off between waiting times and quality in a constrained hospital market

Abstract While aging population and technological innovation are expected to increase healthcare demand in the future, increase in healthcare spending is not likely to be sustainable in times of fiscal constraint. This might lead to a tightening of hospital capacity and, potentially, to higher patient waiting times. This paper studies waiting times and quality in a healthcare market where semi‐altruistic hospitals operate at full capacity. We show that in this context a trade‐off between waiting times and quality emerges which, if hospitals dislike patients to wait, decreases the incentive for the quality of care. We also show that, when hospitals operate at full capacity, standard waiting time policies involving targets and penalties (e.g., “Targets and Terror” in England) can meet the target at the expense of a lower quality of care, with relevant implications for the empirical evaluation of waiting time policy.