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How Payment Systems Affect Physicians´ Provision Behaviour – An Experimental Investigation

  • Heike Hennig-Schmidt
  • Reinhard Selten
  • Daniel Wiesen


A central concern in health economics is to understand the influence of commonly used physician payment systems. We introduce a controlled laboratory experiment to analyze the influence of fee-for-service (FFS) and capitation (CAP) payments on physicians' behaviour. Medical students decide as experimental physicians on the quantity of medical services. Real patients gain a monetary benefit from their choices. Our main findings are that patients are overserved in FFS and underserved in CAP. Financial incentives are not the only motivation for physicians' quantity decisions, though. The patient benefit is of considerable importance as well. Patients are affected differently by the two payment systems. Those patients in need of a low level of medical services are better off under CAP, whereas patients with a high need of medical services gain more health benefit when physicians are paid by FFS.

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Paper provided by University of Bonn, Germany in its series Bonn Econ Discussion Papers with number bgse29_2009.

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Length: 34
Date of creation: Jul 2009
Date of revision:
Handle: RePEc:bon:bonedp:bgse29_2009
Contact details of provider: Postal: Bonn Graduate School of Economics, University of Bonn, Adenauerallee 24 - 26, 53113 Bonn, Germany
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