IDEAS home Printed from https://ideas.repec.org/a/bla/jemstr/v8y1999i3p383-431.html
   My bibliography  Save this article

Separating the True Effect from Gaming in Incentive‐Based Contracts in Health Care

Author

Listed:
  • Mingshan Lu

Abstract

This paper studies the effect of incentive regulation on health care. In the context of incentive‐based health contracts, which might also introduce an incentive for the providers simply to report better treatment outcomes, evaluation of treatment using the information supplied by the providers (reported output) could be problematic. The systematic error on the output report is called providers' gaming behavior. This paper develops a general method for decomposing the effect of incentive‐based contracts on performance into the true effect, which is the result of clinicians' improved effort induced by the contract, and the gaming effect, which is due to the change in the providers' reporting practice. The method follows the essence of linear structural relation (LISREL) models, and the true treatment output is modeled using a latent variable. Various output measures can be included in the structural evaluation model, but objective measure(s) (output measures not affected by providers' potential gaming) must be constructed based on available information to identify gaming through its correlation with the reported measures. The strengths of this method are that information from more than one output measure can be used, no monitoring system is required, and the construction of a gold‐standard measure is not necessary. This method is applied to evaluate the impact of Maine's performance‐based contracting on its public providers' substance‐abuse services. Evidence of gaming is found in Maine's system, which remains robust in most of the sensitivity analyses. The methodology developed here can be used to evaluate the impact of a broad range of incentive‐based contracts.

Suggested Citation

  • Mingshan Lu, 1999. "Separating the True Effect from Gaming in Incentive‐Based Contracts in Health Care," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 8(3), pages 383-431, September.
    • Handle: RePEc:bla:jemstr:v:8:y:1999:i:3:p:383-431
    DOI: 10.1111/j.1430-9134.1999.00383.x
    as

    Download full text from publisher

    File URL: https://doi.org/10.1111/j.1430-9134.1999.00383.x
    Download Restriction: no
    File URL: https://libkey.io/10.1111/j.1430-9134.1999.00383.x?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    References listed on IDEAS

    as
    1. Marcel Kerkhofs & Maarten Lindeboom, 1995. "Subjective health measures and state dependent reporting errors," Health Economics, John Wiley & Sons, Ltd., vol. 4(3), pages 221-235, May.
    2. Michael Grossman, 1972. "The Demand for Health: A Theoretical and Empirical Investigation," NBER Books, National Bureau of Economic Research, Inc, number gros72-1, March.
    3. White, Halbert, 1980. "A Heteroskedasticity-Consistent Covariance Matrix Estimator and a Direct Test for Heteroskedasticity," Econometrica, Econometric Society, vol. 48(4), pages 817-838, May.
    4. 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.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Lien, Hsien-Ming & Lu, Mingshan & Albert Ma, Ching-To & McGuire, Thomas G., 2010. "Progress and compliance in alcohol abuse treatment," Journal of Health Economics, Elsevier, vol. 29(2), pages 213-225, March.
    2. Karen Eggleston & Randall P. Ellis & Mingshan Lu, 2007. "Prevention and Dynamic Risk Adjustment," Boston University - Department of Economics - Working Papers Series WP2007-023, Boston University - Department of Economics.
    3. Daniel A. Ackerberg & Matilde P. Machado & Michael H. Riordan, 2001. "Measuring the Relative Performance of Providers of a Health Service," NBER Working Papers 8385, National Bureau of Economic Research, Inc.
    4. Duchoslav, Jan & Cecchi, Francesco, 2019. "Do incentives matter when working for god? The impact of performance-based financing on faith-based healthcare in Uganda," World Development, Elsevier, vol. 113(C), pages 309-319.
    5. Chalkley, Martin & Khalil, Fahad, 2005. "Third party purchasing of health services: Patient choice and agency," Journal of Health Economics, Elsevier, vol. 24(6), pages 1132-1153, November.
    6. Matilde P. Machado & Ricardo Mora & Antonio Romero-Medina, 2012. "Can We Infer Hospital Quality From Medical Graduates’ Residency Choices?," Journal of the European Economic Association, European Economic Association, vol. 10(6), pages 1400-1424, December.
    7. Chen, Alice & Lakdawalla, Darius N., 2019. "Healing the poor: The influence of patient socioeconomic status on physician supply responses," Journal of Health Economics, Elsevier, vol. 64(C), pages 43-54.
    8. Karen Eggleston & Randall P. Ellis & Mingshan Lu, 2012. "Risk adjustment and prevention," Canadian Journal of Economics, Canadian Economics Association, vol. 45(4), pages 1586-1607, November.
    9. Machado, Matilde P., 2003. "Substance abuse treatment: what do we know? an economist's perspective," UC3M Working papers. Economics we035621, Universidad Carlos III de Madrid. Departamento de Economía.
    10. Mingshan Lu & Ching‐to Albert Ma & Lasheng Yuan, 2003. "Risk selection and matching in performance‐based contracting," Health Economics, John Wiley & Sons, Ltd., vol. 12(5), pages 339-354, May.
    11. Cavusoglu, Nevin, 2012. "LISREL growth model on direct and indirect effects using cross-country data," Economic Modelling, Elsevier, vol. 29(6), pages 2362-2370.
    12. Machado, Matilde P. & Mora, Ricardo & Romero-Medina, Antonio, 2006. "A methodology to measure hospital quality using physicians' choices over training vacancies," UC3M Working papers. Economics we060201, Universidad Carlos III de Madrid. Departamento de Economía.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Andrew Clark & Fabrice Etile, 1999. "The Effect of Health Information on Cigarette Consumption: Evidence from British Panel Data," Cahiers de la Maison des Sciences Economiques bla99090, Université Panthéon-Sorbonne (Paris 1).
    2. repec:hal:psewpa:halshs-00590524 is not listed on IDEAS
    3. Gimenez-Nadal, J. Ignacio & Molina, Jose Alberto, 2015. "Health status and the allocation of time: Cross-country evidence from Europe," Economic Modelling, Elsevier, vol. 46(C), pages 188-203.
    4. Fabrice Etilé & Carine Milcent, 2006. "Income‐related reporting heterogeneity in self‐assessed health: evidence from France," Health Economics, John Wiley & Sons, Ltd., vol. 15(9), pages 965-981, September.
    5. David Bishai, 1996. "Quality time: How parents' schooling affects child health through its interaction with childcare time in Bangladesh," Health Economics, John Wiley & Sons, Ltd., vol. 5(5), pages 383-407, September.
    6. William H. Greene & David A. Hensher, 2008. "Modeling Ordered Choices: A Primer and Recent Developments," Working Papers 08-26, New York University, Leonard N. Stern School of Business, Department of Economics.
    7. Robert Kaestner & Theodore Joyce & Andrew Racine, 1999. "Does Publicly Provided Health Insurance Improve the Health of Low-Income Children in the United States," NBER Working Papers 6887, National Bureau of Economic Research, Inc.
    8. Charasse-Pouélé, Cécile & Fournier, Martin, 2006. "Health disparities between racial groups in South Africa: A decomposition analysis," Social Science & Medicine, Elsevier, vol. 62(11), pages 2897-2914, June.
    9. J. Ignacio Gimenez-Nadal & Jose Alberto Molina, 2016. "Health inequality and the uses of time for workers in Europe: policy implications," IZA Journal of European Labor Studies, Springer;Forschungsinstitut zur Zukunft der Arbeit GmbH (IZA), vol. 5(1), pages 1-18, December.
    10. Richard G. Frank & Martin Gaynor, 1991. "Organizational Failure and Government Transfers: Evidence From an Experiment in the Financing of Mental Health Care," NBER Working Papers 3923, National Bureau of Economic Research, Inc.
    11. Dominik Schreyer, 2019. "Football spectator no-show behaviour in the German Bundesliga," Applied Economics, Taylor & Francis Journals, vol. 51(45), pages 4882-4901, September.
    12. S. Arunachalam & Sridhar N. Ramaswami & Pol Herrmann & Doug Walker, 2018. "Innovation pathway to profitability: the role of entrepreneurial orientation and marketing capabilities," Journal of the Academy of Marketing Science, Springer, vol. 46(4), pages 744-766, July.
    13. Timothy Erickson & Toni M. Whited, 2000. "Measurement Error and the Relationship between Investment and q," Journal of Political Economy, University of Chicago Press, vol. 108(5), pages 1027-1057, October.
    14. Paul W. Miller & Barry R. Chiswick, 2002. "Immigrant earnings: Language skills, linguistic concentrations and the business cycle," Journal of Population Economics, Springer;European Society for Population Economics, vol. 15(1), pages 31-57.
    15. Fors, Gunnar & Zejan, Mario, 1996. "Overseas R&D by Multinationals in foreign Centers of Excellence," SSE/EFI Working Paper Series in Economics and Finance 111, Stockholm School of Economics.
    16. Rodrigo M. S. Moita & Claudio Paiva, 2013. "Political Price Cycles in Regulated Industries: Theory and Evidence," American Economic Journal: Economic Policy, American Economic Association, vol. 5(1), pages 94-121, February.
    17. repec:spo:wpmain:info:hdl:2441/7172 is not listed on IDEAS
    18. Butler, Marty & Leone, Andrew J. & Willenborg, Michael, 2004. "An empirical analysis of auditor reporting and its association with abnormal accruals," Journal of Accounting and Economics, Elsevier, vol. 37(2), pages 139-165, June.
    19. Baiyegunhi, L.J.S. & Oppong, B.B., 2016. "Commercialisation of mopane worm (Imbrasia belina) in rural households in Limpopo Province, South Africa," Forest Policy and Economics, Elsevier, vol. 62(C), pages 141-148.
    20. Kristina Burström & Magnus Johannesson & Finn Diderichsen, 2003. "The value of the change in health in Sweden 1980/81 to 1996/97," Health Economics, John Wiley & Sons, Ltd., vol. 12(8), pages 637-654, August.
    21. MacKinnon, J G, 1989. "Heteroskedasticity-Robust Tests for Structural Change," Empirical Economics, Springer, vol. 14(2), pages 77-92.
    22. Fenech, Jean-Pierre & Skully, Michael & Xuguang, Han, 2014. "Franking credits and market reactions: Evidence from the Australian convertible security market," Journal of International Financial Markets, Institutions and Money, Elsevier, vol. 32(C), pages 1-19.

    More about this item

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:bla:jemstr:v:8:y:1999:i:3:p:383-431. See general information about how to correct material in RePEc.

    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 CitEc recognized a bibliographic reference but did not link an item in RePEc 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 RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Wiley Content Delivery (email available below). General contact details of provider: http://www.kellogg.northwestern.edu/research/journals/JEMS/ .

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

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.