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How payment systems affect physicians' provision behaviour--An experimental investigation

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  • Hennig-Schmidt, Heike
  • Selten, Reinhard
  • Wiesen, Daniel

Abstract

Understanding how physicians respond to incentives from payment schemes is a central concern in health economics research. We introduce a controlled laboratory experiment to analyse the influence of incentives from fee-for-service and capitation payments on physicians' supply of medical services. In our experiment, physicians choose quantities of medical services for patients with different states of health. We find that physicians provide significantly more services under fee-for-service than under capitation. Patients are overserved under fee-for-service and underserved under capitation. However, payment incentives are not the only motivation for physicians' quantity choices, as patients' health benefits are of considerable importance as well. We find that patients in need of a high (low) level of medical services receive larger health benefits under fee-for-service (capitation).

Suggested Citation

  • 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.
  • Handle: RePEc:eee:jhecon:v:30:y:2011:i:4:p:637-646
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    More about this item

    Keywords

    Physician payment system Laboratory experiment Incentives Fee-for-service Capitation;

    JEL classification:

    • C91 - Mathematical and Quantitative Methods - - Design of Experiments - - - Laboratory, Individual Behavior
    • I11 - Health, Education, and Welfare - - Health - - - Analysis of Health Care Markets

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