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

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  • Ellen P. Green

    () (Department of Economics,University of Delaware)

Abstract

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.

Suggested Citation

  • Ellen P. Green, 2013. "Payment Systems in the Healthcare Industry: An Experimental Study Of Physician Incentives," Working Papers 13-05, University of Delaware, Department of Economics.
  • Handle: RePEc:dlw:wpaper:13-05.
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    References listed on IDEAS

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    Cited by:

    1. Brosig-Koch, Jeannette & Kairies-Schwarz, Nadja & Kokot, Johanna, 2014. "Sorting into Physician Payment Schemes – A Laboratory Experiment," Ruhr Economic Papers 529, RWI - Leibniz-Institut für Wirtschaftsforschung, Ruhr-University Bochum, TU Dortmund University, University of Duisburg-Essen.
    2. Huck, Steffen & Lünser, Gabriele & Spitzer, Florian & Tyran, Jean-Robert, 2016. "Medical insurance and free choice of physician shape patient overtreatment: A laboratory experiment," Journal of Economic Behavior & Organization, Elsevier, vol. 131(PB), pages 78-105.
    3. Lagarde, Mylène & Blaauw, Duane, 2017. "Physicians’ responses to financial and social incentives: A medically framed real effort experiment," Social Science & Medicine, Elsevier, vol. 179(C), pages 147-159.
    4. Hafner, Lucas & Reif, Simon & Seebauer, Michael, 2017. "Physician behavior under prospective payment schemes: Evidence from artefactual field and lab experiments," FAU Discussion Papers in Economics 18/2017, Friedrich-Alexander University Erlangen-Nuremberg, Institute for Economics.
    5. Mimra, Wanda & Rasch, Alexander & Waibel, Christian, 2016. "Second opinions in markets for expert services: Experimental evidence," Journal of Economic Behavior & Organization, Elsevier, vol. 131(PB), pages 106-125.
    6. repec:eee:jeborg:v:142:y:2017:i:c:p:396-403 is not listed on IDEAS
    7. repec:eee:jeborg:v:137:y:2017:i:c:p:374-397 is not listed on IDEAS
    8. repec:wly:econjl:v:128:y:2018:i:611:p:1367-1394 is not listed on IDEAS
    9. Helmut Bester & Matthias Dahm, 2018. "Credence Goods, Costly Diagnosis and Subjective Evaluation," Economic Journal, Royal Economic Society, vol. 128(611), pages 1367-1394, June.
    10. Bejarano, Hernán & Green, Ellen P. & Rassenti, Stephen, 2017. "Payment scheme self-selection in the credence goods market: An experimental study," Journal of Economic Behavior & Organization, Elsevier, vol. 142(C), pages 396-403.
    11. Brosig-Koch, Jeannette & Hehenkamp, Burkhard & Kokot, Johanna, 2016. "The effects of competition on medical service provision," Annual Conference 2016 (Augsburg): Demographic Change 145589, Verein für Socialpolitik / German Economic Association.
    12. Brosig-Koch, Jeannette & Hennig-Schmidt, Heike & Kairies-Schwarz, Nadja & Wiesen, Daniel, 2016. "Using artefactual field and lab experiments to investigate how fee-for-service and capitation affect medical service provision," Journal of Economic Behavior & Organization, Elsevier, vol. 131(PB), pages 17-23.
    13. Castro, M.F.; & Ferrara, P.; & Guccio, C.; & Lisi, D.;, 2018. "Medical Malpractice Liability and Physicians’ Behavior:Experimental Evidence," Health, Econometrics and Data Group (HEDG) Working Papers 18/11, HEDG, c/o Department of Economics, University of York.
    14. Jeannette Brosig-Koch & Nadja Kairies-Schwarz & Johanna Kokot, 2014. "Sorting into Physician Payment Schemes – A Laboratory Experiment," Ruhr Economic Papers 0529, Rheinisch-Westfälisches Institut für Wirtschaftsforschung, Ruhr-Universität Bochum, Universität Dortmund, Universität Duisburg-Essen.
    15. repec:zbw:rwirep:0529 is not listed on IDEAS

    More about this item

    Keywords

    Physician Payment System; Laboratory Experiment; Incentives; Fee-for-Service; Capitation; Salary; Report Cards; Pay-for-Performance; Crowd Out;

    JEL classification:

    • C9 - Mathematical and Quantitative Methods - - Design of Experiments
    • I1 - Health, Education, and Welfare - - Health

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