The Ethics and Economics of Kickbacks and Fee Splitting
AbstractThis paper examines the welfare effects of fee splitting or kickbacks paid by one physician to another in return for patient referrals. This practice is regarded as unethical and illegal in most cases, but it is shown that in a principal-agent context it is possible for fee splitting to offer incentives which actually improve patient welfare. Fee splitting occurs when there is a divergence between price and the referral partner's marginal opportunity cost. A restructuring of fee levels to yield physicians equal net income per unit time would remove the incentive for fee splitting. In the absence of this reform it is shown that fee splitting may induce the first-contact physician to refer instead of performing a lower quality procedure himself, and can also be a tool for eroding specialist monopoly power.
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Bibliographic InfoArticle provided by The RAND Corporation in its journal Bell Journal of Economics.
Volume (Year): 10 (1979)
Issue (Month): 1 (Spring)
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- Christopher C. Afendulis & Daniel P. Kessler, 2006. "Tradeoffs from Integrating Diagnosis and Treatment in Markets for Health Care," NBER Working Papers 12623, National Bureau of Economic Research, Inc.
- Christopher Afendulis & Daniel Kessler, 2011. "Vertical Integration and Optimal Reimbursement Policy," NBER Working Papers 17316, National Bureau of Economic Research, Inc.
- Maria Arbatskaya & Hideo Konishi, 2005.
"Referrals in Search Markets,"
Boston College Working Papers in Economics
614, Boston College Department of Economics, revised 10 May 2011.
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