In most European countries hospitals' payment is based on a prospective payment per DRG. This article highlights the potential drawbacks of such a payment system when the regulator (the National Health Insurance) can observe neither the quality enhancement nor the cost reduction efforts. In order to avoid hospitals' strategies such as patients' selection or quality reduction induced by the prospective payment, we show that mixed payment systems can solve the trade-off between different goals in a second best world. [Author]