Physicians' payment contracts, treatment decisions and diagnosis accuracy
We derive optimal payment contracts for physicians when neither physicians' effort to gather information about the patient's health condition (diagnosis effort) nor the actual patient's health condition (physicians' private information) are contractible. In a model where the patient is allowed to demand health care on more than one occasion, we show that, in general, the optimal payment contract includes supply-side cost sharing. This provides the physician with incentives to provide the most adequate treatment and to gather an informative signal about the patient's illness, to decrease the likelihood of future cost sharing. However, for some extreme values of the parameters of the model, we show that a public insurer may prefer to induce some 'blind' decision making. Copyright © 2001 John Wiley & Sons, Ltd.
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Volume (Year): 10 (2001)
Issue (Month): 1 ()
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References listed on IDEAS
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- Randall P. Ellis & Thomas G. McGuire, 1993. "Supply-Side and Demand-Side Cost Sharing in Health Care," Journal of Economic Perspectives, American Economic Association, vol. 7(4), pages 135-151, Fall.
- Ching-to Albert Ma & Thomas G. McGuire, 1995.
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- Gaynor, Martin, 1994.
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- Martin Gaynor, 1994. "Issues in the Industrial Organization of the Market for Physician Services," NBER Working Papers 4695, National Bureau of Economic Research, Inc.
- Ellis, Randall P. & McGuire, Thomas G., 1990. "Optimal payment systems for health services," Journal of Health Economics, Elsevier, vol. 9(4), pages 375-396, December.
- Chalkley, M. & Malcomson, J.M., 1995.
"Contracting for health services when patient demand does not reflect quality,"
Discussion Paper Series In Economics And Econometrics
9514, Economics Division, School of Social Sciences, University of Southampton.
- Chalkley, Martin & Malcomson, James M., 1998. "Contracting for health services when patient demand does not reflect quality," Journal of Health Economics, Elsevier, vol. 17(1), pages 1-19, January.
- Ma, Ching-to Albert, 1994.
"Health Care Payment Systems: Cost and Quality Incentives,"
Journal of Economics & Management Strategy,
Wiley Blackwell, vol. 3(1), pages 93-112, Spring.
- Ching-to Albert Ma, 1994. "Health Care Payment Systems: Cost and Quality Incentives," Papers 0047, Boston University - Industry Studies Programme.
- Dranove, David, 1988. "Demand Inducement and the Physician/Patient Relationship," Economic Inquiry, Western Economic Association International, vol. 26(2), pages 281-98, April.
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