Advanced Search
MyIDEAS: Login to save this paper or follow this series

Payment Mechanisms in the Healthcare Industry: An Experimental Study of Physician Incentives in a Multiple Principal Agent Setting

Contents:

Author Info

  • Ellen P. Green

    ()
    (Department of Economics, University of Delaware)

Registered author(s):

    Abstract

    Current 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.

    Download Info

    If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
    File URL: http://graduate.lerner.udel.edu/sites/default/files/ECON/PDFs/RePEc/dlw/WorkingPapers/2012/UDWP2012-11.pdf
    Download Restriction: no

    Bibliographic Info

    Paper provided by University of Delaware, Department of Economics in its series Working Papers with number 12-11.

    as in new window
    Length: 29 pages
    Date of creation: 2012
    Date of revision:
    Handle: RePEc:dlw:wpaper:12-11.

    Contact details of provider:
    Postal: Purnell Hall, Newark, Delaware 19716
    Phone: (302) 831-2565
    Fax: (302) 831-6968
    Web page: http://www.lerner.udel.edu/departments/economics/department-economics/
    More information through EDIRC

    Related research

    Keywords: Multiple principal agent theory; intrinsic motivation; other-regarding behavior; Fee-For-Service; Capitation; Salary;

    Find related papers by JEL classification:

    This paper has been announced in the following NEP Reports:

    References

    References listed on IDEAS
    Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
    as in new window
    1. Carola Frydman & Dirk Jenter, 2010. "CEO Compensation," NBER Working Papers 16585, National Bureau of Economic Research, Inc.
    2. Ernst Fehr & Alexander Klein & Klaus M Schmidt, 2007. "Fairness and Contract Design," Econometrica, Econometric Society, Econometric Society, vol. 75(1), pages 121-154, 01.
    3. Dranove, David & Wehner, Paul, 1994. "Physician-induced demand for childbirths," Journal of Health Economics, Elsevier, vol. 13(1), pages 61-73, March.
    4. Patrick Bolton & Mathias Dewatripont, 2005. "Contract Theory," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262025760, December.
    5. Gürtler, Marc & Gürtler, Oliver, 2012. "Inequality aversion and externalities," Journal of Economic Behavior & Organization, Elsevier, vol. 84(1), pages 111-117.
    6. Cromwell, Jerry & Mitchell, Janet B., 1986. "Physician-induced demand for surgery," Journal of Health Economics, Elsevier, vol. 5(4), pages 293-313, December.
    7. Holmstrom, Bengt & Tirole, Jean, 1991. "Transfer Pricing and Organizational Form," Journal of Law, Economics and Organization, Oxford University Press, Oxford University Press, vol. 7(2), pages 201-28, Fall.
    8. Bull, Clive & Schotter, Andrew & Weigelt, Keith, 1987. "Tournaments and Piece Rates: An Experimental Study," Journal of Political Economy, University of Chicago Press, University of Chicago Press, vol. 95(1), pages 1-33, February.
    9. Lazear, Edward P & Rosen, Sherwin, 1981. "Rank-Order Tournaments as Optimum Labor Contracts," Journal of Political Economy, University of Chicago Press, University of Chicago Press, vol. 89(5), pages 841-64, October.
    10. Ma, Ching-to Albert & McGuire, Thomas G, 1997. "Optimal Health Insurance and Provider Payment," American Economic Review, American Economic Association, vol. 87(4), pages 685-704, September.
    11. Frank, Bjorn, 1998. "Good news for experimenters: subjects do not care about your welfare," Economics Letters, Elsevier, vol. 61(2), pages 171-174, November.
    12. Amihai Glazer, 2008. "Optimal Contracts When a Worker Envies His Boss," Journal of Law, Economics and Organization, Oxford University Press, Oxford University Press, vol. 24(1), pages 120-137, May.
    13. Guth, Werner & Ockenfels, Peter & Wendel, Markus, 1993. "Efficiency by Trust in Fairness? Multiperiod Ultimatum Bargaining Experiments with an Increasing Cake," International Journal of Game Theory, Springer, Springer, vol. 22(1), pages 51-73.
    14. Englmaier, Florian & Wambach, Achim, 2010. "Optimal incentive contracts under inequity aversion," Games and Economic Behavior, Elsevier, vol. 69(2), pages 312-328, July.
    15. Forsythe Robert & Horowitz Joel L. & Savin N. E. & Sefton Martin, 1994. "Fairness in Simple Bargaining Experiments," Games and Economic Behavior, Elsevier, vol. 6(3), pages 347-369, May.
    16. Hoffman Elizabeth & McCabe Kevin & Shachat Keith & Smith Vernon, 1994. "Preferences, Property Rights, and Anonymity in Bargaining Games," Games and Economic Behavior, Elsevier, vol. 7(3), pages 346-380, November.
    17. Gosden, Toby & Sibbald, Bonnie & Williams, Jackie & Petchey, Roland & Leese, Brenda, 2003. "Paying doctors by salary: a controlled study of general practitioner behaviour in England," Health Policy, Elsevier, vol. 64(3), pages 415-423, June.
    18. Hideshi Itoh, 2004. "Moral Hazard and Other-Regarding Preferences," The Japanese Economic Review, Japanese Economic Association, Japanese Economic Association, vol. 55(1), pages 18-45.
    Full references (including those not matched with items on IDEAS)

    Citations

    Lists

    This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

    Statistics

    Access and download statistics

    Corrections

    When requesting a correction, please mention this item's handle: RePEc:dlw:wpaper:12-11.. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Saul Hoffman).

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If references are entirely missing, you can add them using this form.

    If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.