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Allocation of health care under pay for performance: Winners and losers

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  • Oxholm, Anne Sophie
  • Di Guida, Sibilla
  • Gyrd-Hansen, Dorte

Abstract

Many physicians receive a payment for their performance (P4P). This performance is often linked to a health target that triggers a bonus when met. For some patients the target is easily met, while others require a significant amount of care to reach the target (if ever). This study contributes to the literature by providing evidence of how P4P affects allocation of care across patients with low and high responsiveness to treatment compared to a fixed payment, such as capitation and salary, under different degrees of resource constraint. Our evidence is based on a controlled laboratory experiment involving 143 medical students in Denmark in 2019. We find that patients who have the potential to reach the health target, gain care under P4P, whereas patients with no potential to reach it, may receive less care. Redistribution of care between patients under P4P arises when physicians are resource constrained. As many physicians are currently operating under tight resource constraints, policymakers should be careful to avoid unintended inequalities in patients’ access to health care when introducing P4P. Risk-adjusting the performance target may potentially solve this issue.

Suggested Citation

  • Oxholm, Anne Sophie & Di Guida, Sibilla & Gyrd-Hansen, Dorte, 2021. "Allocation of health care under pay for performance: Winners and losers," Social Science & Medicine, Elsevier, vol. 278(C).
  • Handle: RePEc:eee:socmed:v:278:y:2021:i:c:s0277953621002719
    DOI: 10.1016/j.socscimed.2021.113939
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    Cited by:

    1. Dongxu Li & Min Su & Xi Guo & Weile Zhang & Tianjiao Zhang, 2022. "The Effect of Medical Choice on Health Costs of Middle-Aged and Elderly Patients with Chronic Disease: Based on Principal-Agent Theory," IJERPH, MDPI, vol. 19(13), pages 1-14, June.
    2. Atehortua, S & Rodríguez-Valencia, A, 2021. "Physician s Allocation Preferences under Scarcity and Uncertainty," Documentos de Trabajo 19665, Universidad del Rosario.
    3. Brosig-Koch, Jeannette & Groß, Mona & Hennig-Schmidt, Heike & Kairies-Schwarz, Nadja & Wiesen, Daniel, 2021. "Physicians' incentives, patients' characteristics, and quality of care: A systematic experimental comparison of fee-for-service, capitation, and pay for performance," Ruhr Economic Papers 923, RWI - Leibniz-Institut für Wirtschaftsforschung, Ruhr-University Bochum, TU Dortmund University, University of Duisburg-Essen.
    4. Cadena, Brian C. & Smith, Austin C., 2022. "Performance pay, productivity, and strategic opt-out: Evidence from a community health center," Journal of Public Economics, Elsevier, vol. 206(C).
    5. Groß, Mona & Hennig-Schmidt, Heike & Wiesen, Daniel, 2023. "Personality and physician performance pay: Evidence from a behavioral experiment in health," HERO Online Working Paper Series 2023:5, University of Oslo, Health Economics Research Programme.
    6. Jeannette Brosig‐Koch & Burkhard Hehenkamp & Johanna Kokot, 2023. "Who benefits from quality competition in health care? A theory and a laboratory experiment on the relevance of patient characteristics," Health Economics, John Wiley & Sons, Ltd., vol. 32(8), pages 1785-1817, August.
    7. Ge Ge & Geir Godager & Jian Wang, 2022. "Exploring physician agency under demand‐side cost sharing—An experimental approach," Health Economics, John Wiley & Sons, Ltd., vol. 31(6), pages 1202-1227, June.
    8. Tzani, Dimitra & Stavrakas, Vassilis & Santini, Marion & Thomas, Samuel & Rosenow, Jan & Flamos, Alexandros, 2022. "Pioneering a performance-based future for energy efficiency: Lessons learnt from a comparative review analysis of pay-for-performance programmes," Renewable and Sustainable Energy Reviews, Elsevier, vol. 158(C).

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    More about this item

    Keywords

    Pay for performance; Inequality; Access to care; Laboratory experiment; Denmark;
    All these keywords.

    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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