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Doctors' remuneration schemes and hospital competition in two-sided markets

Author

Listed:
  • David Bardey

    (University of Los Andes, TSE-R - Toulouse School of Economics - UT Capitole - Université Toulouse Capitole - Comue de Toulouse - Communauté d'universités et établissements de Toulouse - EHESS - École des hautes études en sciences sociales - CNRS - Centre National de la Recherche Scientifique - INRAE - Institut National de Recherche pour l’Agriculture, l’Alimentation et l’Environnement)

  • Helmuth Cremer

    (TSE-R - Toulouse School of Economics - UT Capitole - Université Toulouse Capitole - Comue de Toulouse - Communauté d'universités et établissements de Toulouse - EHESS - École des hautes études en sciences sociales - CNRS - Centre National de la Recherche Scientifique - INRAE - Institut National de Recherche pour l’Agriculture, l’Alimentation et l’Environnement)

  • Jean-Marie Lozachmeur

    (TSE-R - Toulouse School of Economics - UT Capitole - Université Toulouse Capitole - Comue de Toulouse - Communauté d'universités et établissements de Toulouse - EHESS - École des hautes études en sciences sociales - CNRS - Centre National de la Recherche Scientifique - INRAE - Institut National de Recherche pour l’Agriculture, l’Alimentation et l’Environnement)

Abstract

This paper studies the design of doctors' remuneration schemes. Two for-profit hospitals compete to attract patients and to affiliate doctors. The numbers of patients and doctors determine an hospital's quality level which is valued on both sides. Quality can be enhanced by doctors through a (costly) effort. We first consider pure salary, case payment or fee-for-service schemes on the doctors' side. Then, we study schemes that mix fee-for-service with either salary or case payments. We show that case payment schemes (either pure or in combination with fee-for-service) are more patient friendly than (pure or mixed) salary schemes. This comparison is exactly reversed on the doctors' side. Quite surprisingly, patients always lose when a fee-for-service scheme is introduced (pure or mixed). This is true even though the fee-for-service is the only way to induce the doctors to exert effort, and whatever the patients' valuation of this effort. In other words, the increase in doctors' effort brought about by the fee-for-service is more than compensated by the increase in fees faced by patients.

Suggested Citation

  • David Bardey & Helmuth Cremer & Jean-Marie Lozachmeur, 2012. "Doctors' remuneration schemes and hospital competition in two-sided markets," Post-Print hal-05107818, HAL.
    • Handle: RePEc:hal:journl:hal-05107818
    DOI: 10.1515/1935-1682.3254
    Note: View the original document on HAL open archive server: https://hal.science/hal-05107818v1
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    References listed on IDEAS

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    1. David Bardey & Helmuth Cremer & Jean-Marie Lozachmeur, 2014. "Competition in Two-Sided Markets with Common Network Externalities," Review of Industrial Organization, Springer;The Industrial Organization Society, vol. 44(4), pages 327-345, June.
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    5. David Bardey & Jean‐Charles Rochet, 2010. "Competition Among Health Plans: A Two‐Sided Market Approach," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 19(2), pages 435-451, June.
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    2. David Bardey & Luigi Siciliani, 2021. "Nursing‐homes' competition and distributional implications when the market is two‐sided," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 30(2), pages 472-500, May.
    3. Indranil Dutta & Mario Pezzino & Yan Song, 2022. "Should developing countries ban dual practice by physicians? Analysis under mixed hospital competition," Health Economics, John Wiley & Sons, Ltd., vol. 31(11), pages 2289-2310, November.
    4. David Bardey & Philippe De Donder & Vera Zaporozhets, 2024. "Economic Incentives to Develop and to Use Diagnostic Tests a Literature Review," Documentos CEDE 21024, Universidad de los Andes, Facultad de Economía, CEDE.

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