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Payment Mechanisms and the Composition of Physician Practices: Balancing Cost‐Containment, Access, and Quality of Care

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  • Victoria Barham
  • Olga Milliken

Abstract

We take explicit account of the way in which the supply of physicians and patients in the economy affects the design of physician remuneration schemes, highlighting the three‐way trade‐off between quality of care, access, and cost. Both physicians and patients are heterogeneous. Physicians choose both the number of patients and the quality of care to provide to their patients. When determining physician payment rates, the principal must ensure access to care for all patients. When physicians can adjust the number of patients seen, there is no incentive to over‐treat. In contrast, altruistic physicians always quality stint: they prefer to add an additional patient, rather than to increase the quality of service provided. A mixed payment mechanism does not increase the quality of service provided with respect to capitation. Offering a menu of compensation schemes may constitute a cost‐effective strategy for inducing physicians to choose a given overall caseload but may also generate difficulties with access to care for frail patients. Copyright © 2014 John Wiley & Sons, Ltd.

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  • Victoria Barham & Olga Milliken, 2015. "Payment Mechanisms and the Composition of Physician Practices: Balancing Cost‐Containment, Access, and Quality of Care," Health Economics, John Wiley & Sons, Ltd., vol. 24(7), pages 895-906, July.
    • Handle: RePEc:wly:hlthec:v:24:y:2015:i:7:p:895-906
    DOI: 10.1002/hec.3069
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    2. McKay, Madeleine & Lavergne, M. Ruth & Lea, Amanda Prince & Le, Michael & Grudniewicz, Agnes & Blackie, Doug & Goldsmith, Laurie J. & Marshall, Emily Gard & Mathews, Maria & McCracken, Rita & McGrail,, 2022. "Government policies targeting primary care physician practice from 1998-2018 in three Canadian provinces: A jurisdictional scan," Health Policy, Elsevier, vol. 126(6), pages 565-575.
    3. Jeannette Brosig‐Koch & Heike Hennig‐Schmidt & Nadja Kairies‐Schwarz & Daniel Wiesen, 2017. "The Effects of Introducing Mixed Payment Systems for Physicians: Experimental Evidence," Health Economics, John Wiley & Sons, Ltd., vol. 26(2), pages 243-262, February.
    4. Piotr Korneta & Magdalena Kludacz-Alessandri & Renata Walczak, 2021. "The Impact of COVID-19 on the Performance of Primary Health Care Service Providers in a Capitation Payment System: A Case Study from Poland," IJERPH, MDPI, vol. 18(4), pages 1-19, February.
    5. Nadine Chami & Arthur Sweetman, 2019. "Payment models in primary health care: A driver of the quantity and quality of medical laboratory utilization," Health Economics, John Wiley & Sons, Ltd., vol. 28(10), pages 1166-1178, October.
    6. Wilson, Nicholas, 2018. "Altruism in preventive health behavior: At-scale evidence from the HIV/AIDS pandemic," Economics & Human Biology, Elsevier, vol. 30(C), pages 119-129.
    7. Anell, Anders & Dackehag, Margareta & Dietrichson, Jens & Ellegård, Lina Maria & Kjellsson, Gustav, 2022. "Better Off by Risk Adjustment? Socioeconomic Disparities in Care Utilization in Sweden Following a Payment Reform," Working Papers 2022:15, Lund University, Department of Economics, revised 12 Mar 2024.

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