Payment Mechanisms in the Healthcare Industry: An Experimental Study of Physician Incentives in a Multiple Principal Agent Setting
AbstractCurrent failures in the healthcare industry emphasize the need for a more fundamental understanding of how these contracts incentivize doctors. To aid this understanding, we treat the established physician-client-employer relationship as a multiple principal agent problem. We use a laboratory experiment, with a real-effort task, to test the relative performance of common payment mechanisms employed in this dual-principal agent relationship (Piece Rate, Flat Rate, Salary, Bonus, and Socialization). This study suggests, contrary to standard contract theory, that relying on extrinsic incentives to motivate physicians may be detrimental and costly for the healthcare industry.
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Bibliographic InfoPaper provided by University of Delaware, Department of Economics in its series Working Papers with number 12-11.
Length: 29 pages
Date of creation: 2012
Date of revision:
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Web page: http://www.lerner.udel.edu/departments/economics/department-economics/
More information through EDIRC
Multiple principal agent theory; intrinsic motivation; other-regarding behavior; Fee-For-Service; Capitation; Salary;
Find related papers by JEL classification:
- I10 - Health, Education, and Welfare - - Health - - - General
- I12 - Health, Education, and Welfare - - Health - - - Health Production
- I18 - Health, Education, and Welfare - - Health - - - Government Policy; Regulation; Public Health
- J01 - Labor and Demographic Economics - - General - - - Labor Economics: General
- J3 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs
- L2 - Industrial Organization - - Firm Objectives, Organization, and Behavior
This paper has been announced in the following NEP Reports:
- NEP-ALL-2012-09-03 (All new papers)
- NEP-CTA-2012-09-03 (Contract Theory & Applications)
- NEP-EXP-2012-09-03 (Experimental Economics)
- NEP-HEA-2012-09-03 (Health Economics)
- NEP-HRM-2012-09-03 (Human Capital & Human Resource Management)
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