HEALTH ECONOMICS Health Econ. (in press) Published online in Wiley InterScience (www.interscience.wiley.com). DOI:10.1002/hec.1139 HEALTH ECONOMICS LETTERS Choice of dialysis treatment and type of medical unit (private vs public): application of a recursive bivariate probit Lara Gitto a, *, Domenico Santoro b and Giuseppe Sobbrio a a DESAT}Sezione di Economia e Finanza, Universita ` di Messina, Italy b Dipartimento di Nefrologia, Policlinico Universitario di Messina, Italy Summary ESRD patients have to deal with two choices: the first is related to the dialysis modality; the second concerns the type of dialysis unit (public vs private) where to undertake the treatment. Such a choice is related to unobservable factors, among which there might be patients’ clinical factors as well as factors related to the characteristics of each unit. We employ a recursive bivariate probit estimation on a sample of ESRD Sicilian patients in order to evaluate the impact of these factors. Results can have important implications for Sicily in order to organize dialysis services: here, in fact, the number of private centres is higher than in other Italian Regions. Copyright # 2006 John Wiley & Sons, Ltd. Received 19 April 2005; Accepted 15 March 2006 Keywords dialysis; public/private units; econometrics Introduction Dialysis modality selection in Italy involves a simultaneous choice: patients – or physicians, acting as ‘agents’ for patients a – choose between alternative dialysis treatments as well as between type of dialysis unit (public vs private). There are two main dialysis treatments: standard haemodialysis (HD) and peritoneal dialysis (PD). While the medical literature does not highlight any significant differences between the two methods, there might be different assessments about quality of life and emotional and social well-being. Until the early 1990s, the survival of dialysis patients, as reported by some studies, was significantly greater with HD compared to PD. b In recent years, instead, expected survival is the same for both procedures, hence, the choice between HD and PD might depend on unobservable preferences by physicians or patients. Choosing one treatment rather than the other implies a different planning of resources within dialysis units: HD is generally more expensive and requires continuous medical assistance; PD requires less resources but patients need to be more autonomous and better trained about how to perform the treatment. The problem of selection appears particularly interesting as far as end stage renal disease (ESRD) patients are allocated into different types of medical centres according to clinical factors (age or number of co-morbid factors), convenience of use, availability (depending on the alternatives offered within the dialysis centre selected). Patients’ *Correspondence to: DESAT}Sezione di Economia e Finanza, Universita` di Messina, Piazza Pugliatti, I-98100 Messina, Italy. E-mail: Lara.Gitto@unime.it Copyright # 2006 John Wiley & Sons, Ltd.