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Should physicians' dual practice be limited? An incentive approach

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  • Paula González

    (Universidad Pablo de Olavide and CentrA, Sevilla, Spain)

Abstract

We develop a principal-agent model to analyze how the behavior of a physician in the public sector is affected by his activities in the private sector. We show that the physician will have incentives to over-provide medical services when he uses his public activity as a way of increasing his prestige as a private doctor. The health authority only benefits from the physician's dual practice when it is interested in ensuring a very accurate treatment for the patient. Our analysis provides a theoretical framework in which some actual policies implemented to regulate physicians' dual practice can be addressed. In particular, we focus on the possibility that the health authority offers exclusive contracts to physicians and on the implications of limiting physicians' private earnings. Copyright © 2004 John Wiley & Sons, Ltd.

Suggested Citation

  • Paula González, 2004. "Should physicians' dual practice be limited? An incentive approach," Health Economics, John Wiley & Sons, Ltd., vol. 13(6), pages 505-524.
  • Handle: RePEc:wly:hlthec:v:13:y:2004:i:6:p:505-524
    DOI: 10.1002/hec.890
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    References listed on IDEAS

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    1. Gaynor, Martin, 1994. "Issues in the Industrial Organization of the Market for Physician Services," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 3(1), pages 211-255, Spring.
    2. Gal-Or, Esther, 1999. "Optimal Reimbursement and Malpractice Sharing Rules in Health Care Markets," Journal of Regulatory Economics, Springer, vol. 16(3), pages 237-265, November.
    3. Blomqvist, Ake, 1991. "The doctor as double agent: Information asymmetry, health insurance, and medical care," Journal of Health Economics, Elsevier, vol. 10(4), pages 411-432.
    4. Holmstrom, Bengt & Milgrom, Paul, 1991. "Multitask Principal-Agent Analyses: Incentive Contracts, Asset Ownership, and Job Design," Journal of Law, Economics, and Organization, Oxford University Press, vol. 7(0), pages 24-52, Special I.
    5. 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.
    6. Rickman, Neil & McGuire, Alistair, 1999. "Regulating Providers' Reimbursement in a Mixed Market for Health Care," Scottish Journal of Political Economy, Scottish Economic Society, vol. 46(1), pages 53-71, February.
    7. Adrian Towse & Patricia Danzon, 1999. "Medical negligence and the NHS: an economic analysis," Health Economics, John Wiley & Sons, Ltd., vol. 8(2), pages 93-101.
    8. 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.
    9. Paula González, 2002. "Policy Implications Of Transferring Patients To Private Practice," Working Papers. Serie AD 2002-12, Instituto Valenciano de Investigaciones Económicas, S.A. (Ivie).
    10. Dranove, David, 1988. "Demand Inducement and the Physician/Patient Relationship," Economic Inquiry, Western Economic Association International, vol. 26(2), pages 281-298, April.
    11. Izabela Jelovac, 2001. "Physicians' payment contracts, treatment decisions and diagnosis accuracy," Health Economics, John Wiley & Sons, Ltd., vol. 10(1), pages 9-25.
    12. Selden, Thomas M., 1990. "A model of capitation," Journal of Health Economics, Elsevier, vol. 9(4), pages 397-409, December.
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    Citations

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    Cited by:

    1. Paula González, 2005. "On a policy of transferring public patients to private practice," Health Economics, John Wiley & Sons, Ltd., vol. 14(5), pages 513-527.
    2. Porteiro, Nicolas, 2005. "Regulation of specialized medical care with public and private provision," European Journal of Political Economy, Elsevier, vol. 21(1), pages 221-246, March.
    3. McPake, Barbara & Russo, Giuliano & Tseng, Fu-Min, 2014. "How do dual practitioners divide their time? The cases of three African capital cities," Social Science & Medicine, Elsevier, vol. 122(C), pages 113-121.
    4. Gary Biglaiser & Ching-to Albert Ma, 2007. "Moonlighting: public service and private practice," RAND Journal of Economics, RAND Corporation, vol. 38(4), pages 1113-1133, December.
    5. Simona Grassi & Ching-to Albert Ma, 2007. "Subsidy Design and Asymmetric Information: Wealth versus Benefits," Boston University - Department of Economics - Working Papers Series WP2007-033, Boston University - Department of Economics.
    6. González, Paula & Macho-Stadler, Inés, 2013. "A theoretical approach to dual practice regulations in the health sector," Journal of Health Economics, Elsevier, vol. 32(1), pages 66-87.
    7. Liu, Ting & Sun, Jiayin, 2007. "Informal payments in developing countries' public health sector," MPRA Paper 5279, University Library of Munich, Germany.
    8. Tor Iversen & Ching-to Ma, 2011. "Market conditions and general practitioners’ referrals," International Journal of Health Economics and Management, Springer, vol. 11(4), pages 245-265, December.
    9. Kuhn, Michael & Nuscheler, Robert, 2013. "Saving the public from the private? Incentives and outcomes in dual practice," ECON WPS - Vienna University of Technology Working Papers in Economic Theory and Policy 02/2013, Vienna University of Technology, Institute for Mathematical Methods in Economics, Research Group Economics (ECON).
    10. Kurt R. Brekke & Lars Sørgard, 2007. "Public versus private health care in a national health service," Health Economics, John Wiley & Sons, Ltd., vol. 16(6), pages 579-601.
    11. Socha, Karolina, 2010. "Physician dual practice and the public health care provision. Review of the literature," COHERE Working Paper 2010:4, University of Southern Denmark, COHERE - Centre of Health Economics Research.
    12. GONZALEZ, Paula, 2003. "The "gatekeeping" role of general practitioners. Does patients' information matter ?," CORE Discussion Papers 2003089, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
    13. Siciliani, Luigi, 2006. "Selection of treatment under prospective payment systems in the hospital sector," Journal of Health Economics, Elsevier, vol. 25(3), pages 479-499, May.
    14. Socha, Karolina Z. & Bech, Mickael, 2011. "Physician dual practice: A review of literature," Health Policy, Elsevier, vol. 102(1), pages 1-7, September.

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