Incentives In HMOs
AbstractWe studied the effect of physician incentives in an HMO network. Physician incentives are controversial because they may induce doctors to make treatment decisions that differ from those they would choose in the absence of incentives. We set out a theoretical framework for assessing the degree to which incentive contracts do, in fact, induce physicians to deviate from a standard, guided only by patient interest and professional medical judgment. Our empirical evaluation of the model relies on details of the HMO's incentive contracts and access to the firms' internal expenditure records. We estimate that the HMO's incentive contract provides a typical physician an increase, at the margin, of $.10 in income for each $1.00 reduction in medial utilization expenditures. The average response is a 5-percent reduction in medical expenditures. We also find suggestive evidence that financial incentives linked to commonly used "quality" measures may stimulate an improvement in measured quality.
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Bibliographic InfoPaper provided by EconWPA in its series Macroeconomics with number 0111001.
Length: 46 pages
Date of creation: 01 Nov 2001
Date of revision:
Note: Type of Document - Acrobat Adobe PDF; prepared on IBM PC; to print on PostScript; pages: 46; figures: included
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Other versions of this item:
- Martin Gaynor & James B Rebitzer & Lowell J Taylor, 2002. "Incentives in HMO's," The Centre for Market and Public Organisation 03/089, Department of Economics, University of Bristol, UK.
- Martin Gaynor & James B. Rebitzer & Lowell J. Taylor, 2001. "Incentives in HMOs," NBER Working Papers 8522, National Bureau of Economic Research, Inc.
- Martin Gaynor & James B. Rebitzer & Lowell J. Taylor, 2001. "Incentives In HMOs," Economics Working Paper Archive wp_340, Levy Economics Institute, The.
- Martin Gaynor & James Rebitzer & Lowell Taylor, . "Incentives in HMOs," GSIA Working Papers 2003-E21, Carnegie Mellon University, Tepper School of Business.
- E - Macroeconomics and Monetary Economics
This paper has been announced in the following NEP Reports:
- NEP-ALL-2001-11-05 (All new papers)
- NEP-ENT-2001-11-05 (Entrepreneurship)
- NEP-HEA-2001-11-05 (Health Economics)
- NEP-IAS-2001-11-05 (Insurance Economics)
- NEP-NET-2001-11-05 (Network Economics)
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