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Payment Systems in the Healthcare Industry: An Experimental Study Of Physician Incentives

  • Ellen P. Green


    (Department of Economics,University of Delaware)

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    Policy makers and the healthcare industry have proposed changes to physician payment structures as a way to improve the quality of health care and reduce costs. Several of these proposals require healthcare providers to employ a valuebased purchasing program (also known as pay-for-performance [P4P]). However, the way in which existing payment structures impact physician behavior is unclear and, therefore, predicting how well P4P will perform is difficult. To understand the impact physician payment structures have on physician behavior, I approximate the physician-patient relationship in a real-effort laboratory experiment. I study several prominent physician payment structures including feefor- service, capitation, salary, and P4P. I find that physicians are intrinsically motivated to provide high quality care and relying exclusively on extrinsic incentives to motivate physicians is detrimental to the quality of care and costly for the healthcare industry.

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    Paper provided by University of Delaware, Department of Economics in its series Working Papers with number 13-05.

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    Length: 27 pages
    Date of creation: 2013
    Date of revision:
    Handle: RePEc:dlw:wpaper:13-05.
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