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Custom-made health-care: an experimental investigation

Author

Listed:
  • Claudia Keser

    (Universität Göttingen
    CIRANO)

  • Claude Montmarquette

    (CIRANO
    University of Montreal)

  • Martin Schmidt

    (Universität Göttingen
    Present address: KIT)

  • Cornelius Schnitzler

    (Universität Göttingen
    Present address: Arkansas Economic Development Commission)

Abstract

Background Physicians’ financial interests might conflict with the best service to patients. It is essential to gain a thorough understanding of the effect of remuneration systems on physician behaviour. Methods We conducted a controlled laboratory experiment using a within-subject design to investigate physician behaviour underpayment heterogeneity. Each physician provided medical care to patients whose treatments were paid for under fee-for-service (FFS) or capitation (CAP). Results We observed that physicians customized their care in response to the payment system. FFS patients received considerably more medical care than did CAP patients with the same illness and treatment preference. Physicians over-served FFS patients and under-served CAP patients. After a CAP payment reduction, we observed neither a quantity reduction under CAP nor a spillover in FFS patients’ treatment. Conclusions The results suggest that, in our experimental model, fee regulation can be used to some extent to control physician spending since we did not identify a behavioural response to the CAP payment cut. Physicians did not recoup lost income by altering treatment behaviour toward CAP and/or FFS patients. Experimental economics is an excellent tool for ensuring the welfare of all those involved in the health system. Further research should investigate payment incentives as a means of developing health care teams that are more efficient.

Suggested Citation

  • Claudia Keser & Claude Montmarquette & Martin Schmidt & Cornelius Schnitzler, 2020. "Custom-made health-care: an experimental investigation," Health Economics Review, Springer, vol. 10(1), pages 1-12, December.
  • Handle: RePEc:spr:hecrev:v:10:y:2020:i:1:d:10.1186_s13561-020-00299-4
    DOI: 10.1186/s13561-020-00299-4
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    Blog mentions

    As found by EconAcademics.org, the blog aggregator for Economics research:
    1. Chris Sampson’s journal round-up for 11th January 2021
      by Chris Sampson in The Academic Health Economists' Blog on 2021-01-11 12:00:06

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    2. Atehortua, S & Rodríguez-Valencia, A, 2021. "Physician s Allocation Preferences under Scarcity and Uncertainty," Documentos de Trabajo 19665, Universidad del Rosario.
    3. Godager , Geir & Scott, Anthony, 2023. "Physician Behavior and Health Outcomes," HERO Online Working Paper Series 2023:3, University of Oslo, Health Economics Research Programme.
    4. Wang, Jian & Iversen, Tor & Hennig-Schmidt, Heike & Godager, Geir, 2020. "Are patient-regarding preferences stable? Evidence from a laboratory experiment with physicians and medical students from different countries," European Economic Review, Elsevier, vol. 125(C).
    5. Finocchiaro Castro, Massimo & Guccio, Calogero & Romeo, Domenica, 2022. "A systematic literature review of 10 years of behavioral research on health services," EconStor Preprints 266248, ZBW - Leibniz Information Centre for Economics.
    6. Manela Karunadasa & Katri K. Sieberg & Toni Tapani Kristian Jantunen, 2023. "Payment Systems, Supplier-Induced Demand, and Service Quality in Credence Goods: Results from a Laboratory Experiment," Games, MDPI, vol. 14(3), pages 1-31, May.
    7. Wang, Jian & Iversen, Tor & Hennig-Schmidt, Heike & Godager, Geir, 2017. "How Changes in Payment Schemes Influence Provision Behavior," HERO Online Working Paper Series 2017:2, University of Oslo, Health Economics Research Programme.

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    More about this item

    Keywords

    Experimental economics; Physician reimbursement; Capitation; Fee-for-service; Fee regulation;
    All these keywords.

    JEL classification:

    • C91 - Mathematical and Quantitative Methods - - Design of Experiments - - - Laboratory, Individual Behavior
    • I12 - Health, Education, and Welfare - - Health - - - Health Behavior
    • I18 - Health, Education, and Welfare - - Health - - - Government Policy; Regulation; Public Health

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