Payment Systems in the Healthcare Industry: An Experimental Study Of Physician Incentives
AbstractPolicy makers and the healthcare industry have proposed changes to physician payment structures as a way to improve the quality of health care and reduce costs. Several of these proposals require healthcare providers to employ a valuebased purchasing program (also known as pay-for-performance [P4P]). However, the way in which existing payment structures impact physician behavior is unclear and, therefore, predicting how well P4P will perform is difficult. To understand the impact physician payment structures have on physician behavior, I approximate the physician-patient relationship in a real-effort laboratory experiment. I study several prominent physician payment structures including feefor- service, capitation, salary, and P4P. I find that physicians are intrinsically motivated to provide high quality care and relying exclusively on extrinsic incentives to motivate physicians is detrimental to the quality of care and costly for the healthcare industry.
Download InfoIf 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.
Bibliographic InfoPaper provided by University of Delaware, Department of Economics in its series Working Papers with number 13-05.
Length: 27 pages
Date of creation: 2013
Date of revision:
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
Physician Payment System; Laboratory Experiment; Incentives; Fee-for-Service; Capitation; Salary; Report Cards; Pay-for-Performance; Crowd Out;
Find related papers by JEL classification:
- C9 - Mathematical and Quantitative Methods - - Design of Experiments
- I1 - Health, Education, and Welfare - - Health
This paper has been announced in the following NEP Reports:
- NEP-ALL-2013-11-14 (All new papers)
- NEP-EXP-2013-11-14 (Experimental Economics)
- NEP-HEA-2013-11-14 (Health Economics)
- NEP-HRM-2013-11-14 (Human Capital & Human Resource Management)
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.:
- Dan Ariely & Uri Gneezy & George Loewenstein & Nina Mazar, 2005.
"Large stakes and big mistakes,"
05-11, Federal Reserve Bank of Boston.
- Roland Benabou & Jean Tirole, 2003.
"Intrinsic and Extrinsic Motivation,"
Review of Economic Studies,
Wiley Blackwell, vol. 70(3), pages 489-520, 07.
- Devlin, Rose Anne & Sarma, Sisira, 2008. "Do physician remuneration schemes matter? The case of Canadian family physicians," Journal of Health Economics, Elsevier, vol. 27(5), pages 1168-1181, September.
- Ellis, Randall P. & McGuire, Thomas G., 1986. "Provider behavior under prospective reimbursement : Cost sharing and supply," Journal of Health Economics, Elsevier, vol. 5(2), pages 129-151, June.
- Sorensen, Rune J. & Grytten, Jostein, 2003. "Service production and contract choice in primary physician services," Health Policy, Elsevier, vol. 66(1), pages 73-93, October.
- Heike Hennig-Schmidt & Reinhard Selten & Daniel Wiesen, 2009.
"How Payment Systems Affect Physicians´ Provision Behaviour – An Experimental Investigation,"
Bonn Econ Discussion Papers
bgse29_2009, University of Bonn, Germany.
- Hennig-Schmidt, Heike & Selten, Reinhard & Wiesen, Daniel, 2011. "How payment systems affect physicians' provision behaviour--An experimental investigation," Journal of Health Economics, Elsevier, vol. 30(4), pages 637-646, July.
- Heike Hennig-Schmidt & Reinhard Selten & Daniel Wiesen, 2011. "How Payment Systems Affect Physicians' Provision Behaviour – An Experimental Investigation," Bonn Econ Discussion Papers bgse03_2011, University of Bonn, Germany.
- Ballou, Dale, 2001. "Pay for performance in public and private schools," Economics of Education Review, Elsevier, vol. 20(1), pages 51-61, February.
- Ellis, Randall P. & McGuire, Thomas G., 1990. "Optimal payment systems for health services," Journal of Health Economics, Elsevier, vol. 9(4), pages 375-396, December.
- Fehr, Ernst & Schmidt, Klaus M., 2004.
"Fairness and Incentives in a Multi-Task Principle-Agent Model,"
CEPR Discussion Papers
4464, C.E.P.R. Discussion Papers.
- Ernst Fehr & Klaus M. Schmidt, 2004. "Fairness and Incentives in a Multi-task Principal-Agent Model," Scandinavian Journal of Economics, Wiley Blackwell, vol. 106(3), pages 453-474, October.
- Ernst Fehr & Klaus M. Schmidt, . "Fairness and Incentives in a Multi-Task Principal-Agent Model," IEW - Working Papers 191, Institute for Empirical Research in Economics - University of Zurich.
- Fehr, Ernst & Schmidt, Klaus M., 2004. "Fairness and Incentives in a Multi-Task Principal-Agent Model," Discussion Papers in Economics 335, University of Munich, Department of Economics.
- Fehr, Ernst & Schmidt, Klaus M., 2004. "Fairness and incentives in a multi-task principal-agent model," Munich Reprints in Economics 20657, University of Munich, Department of Economics.
- Croxson, B. & Propper, C. & Perkins, A., 2001. "Do doctors respond to financial incentives? UK family doctors and the GP fundholder scheme," Journal of Public Economics, Elsevier, vol. 79(2), pages 375-398, February.
- Matsaganis, Manos & Glennerster, Howard, 1994. "The threat of 'cream skimming' in the post-reform NHS," Journal of Health Economics, Elsevier, vol. 13(1), pages 31-60, March.
- 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.
- Martin Gaynor & Paul Gertler, 1995.
"Moral Hazard and Risk Spreading in Partnerships,"
RAND Journal of Economics,
The RAND Corporation, vol. 26(4), pages 591-613, Winter.
- Camerer, Colin, et al, 1997.
"Labor Supply of New York City Cabdrivers: One Day at a Time,"
The Quarterly Journal of Economics,
MIT Press, vol. 112(2), pages 407-41, May.
- Camerer, Colin & Babcock, Linda & Loewenstein, George & Thaler, Richard, 1996. "Labor Supply of New York City Cab Drivers: One Day At A time," Working Papers 960, California Institute of Technology, Division of the Humanities and Social Sciences.
- Frank, Bjorn, 1998. "Good news for experimenters: subjects do not care about your welfare," Economics Letters, Elsevier, vol. 61(2), pages 171-174, November.
- Holmstrom, Bengt & Milgrom, Paul, 1991. "Multitask Principal-Agent Analyses: Incentive Contracts, Asset Ownership, and Job Design," Journal of Law, Economics and Organization, Oxford University Press, vol. 7(0), pages 24-52, Special I.
- Fuchs, Victor R., 2000. "The future of health economics1," Journal of Health Economics, Elsevier, vol. 19(2), pages 141-157, March.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Saul Hoffman).
If references are entirely missing, you can add them using this form.