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Principal Agency Theory and Health Care Utilization


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  • Helen Schneider
  • Alan Mathios
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    This article uses a principal agent framework to examine the role that monitoring costs faced by an insurer have on health care utilization. We compare hospital lengths of stay for fee-for-service and capitated patients in low and high monitoring cost situations. Monitoring costs associated with a particular procedure are assumed to be high when there is large variation across patients in hospital lengths of stay. The empirical results indicate that differences in utilization between fee-for-service and capitated patients increase as monitoring costs increase. However, we do not find that fee-for-service reimbursement is used less in the difficult to monitor situations. (JEL I1) Copyright 2006, Oxford University Press.

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    Bibliographic Info

    Article provided by Western Economic Association International in its journal Economic Inquiry.

    Volume (Year): 44 (2006)
    Issue (Month): 3 (July)
    Pages: 429-441

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    Handle: RePEc:oup:ecinqu:v:44:y:2006:i:3:p:429-441

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    Cited by:
    1. Yan, Yu-Hua & Hsu, Shuofen & Yang, Chen-Wei & Fang, Shih-Chieh, 2010. "Agency problems in hospitals participating in self-management project under global budget system in Taiwan," Health Policy, Elsevier, vol. 94(2), pages 135-143, February.


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