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Treatment and referral decisions under different physician payment mechanisms

  • Marie Allard

    (HEC Montréal - HEC MONTRÉAL)

  • Izabela Jelovac

    (GATE Lyon Saint-Étienne - Groupe d'analyse et de théorie économique - ENS Lyon - École normale supérieure - Lyon - UL2 - Université Lumière - Lyon 2 - UCBL - Université Claude Bernard Lyon 1 - Université Jean Monnet - Saint-Etienne - PRES Université de Lyon - CNRS - Centre National de la Recherche Scientifique)

  • Pierre-Thomas Léger

    (HEC Montréal - HEC MONTRÉAL, CIRANO - Centre interuniversitaire de recherche en analyse des organisations - UQAM - Université du Québec à Montréal, CIRPEE - Centre interuniversitaire sur le risque, les politiques économiques et l'emploi - Centre Interuniversitaire sur le Risque, les Politiques Economiques et l'Emploi)

This paper analyzes and compares the incentive properties of some common payment mechanisms for GPs, namely fee for service (FFS), capitation and fundholding. It focuses on gatekeeping GPs and it speci cally recognizes GPs heterogeneity in both ability and altruism. It also allows inappropriate care by GPs to lead to more serious illnesses. The results are as follows. Capitation is the payment mechanism that induces the most referrals to expensive specialty care. Fundholding may induce almost as much referrals as capitation when the expected costs of GPs care are high relative to those of specialty care. Although driven by nancial incentives of different nature, the strategic behaviours associated with fundholding and FFS are very much alike. Finally, whether a regulator should use one or another payment mechanism for GPs will depend on (i) his priorities (either cost-containment or quality enhancement) which, in turn, depend on the expected cost difference between GPs care and specialty care, and (ii) the distribution of pro les (diagnostic ability and altruism levels) among GPs.

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Paper provided by HAL in its series Post-Print with number halshs-00650933.

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Date of creation: 2011
Date of revision:
Publication status: Published in Journal of Health Economics, Elsevier, 2011, 30 (5), pp. 880-893
Handle: RePEc:hal:journl:halshs-00650933
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  1. Gary Biglaiser & Ching-to Albert Ma, 2006. "Moonlighting: Public Service and Private Practice," Working Papers 12, Portuguese Competition Authority.
  2. Paula González, 2008. "Gatekeeping versus Direct-Access when Patient Information Matters," Working Papers 2008-05, FEDEA.
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  4. Marie Allard & Pierre Thomas Léger & Lise Rochaix, 2004. "Provider Competition in a Dynamic Setting," Cahiers de recherche 04-07, HEC Montréal, Institut d'économie appliquée.
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  9. Åke Blomqvist & Pierre Thomas Léger, 2003. "Information Asymmetry, Insurance, and the Decision to Hospitalize," Departmental Working Papers wp0305, National University of Singapore, Department of Economics.
  10. Rosella LEVAGGI & Lise ROCHAIX, 2007. "Exit, Choice Or Loyalty: Patient Driven Competition In Primary Care," Annals of Public and Cooperative Economics, Wiley Blackwell, vol. 78(4), pages 501-535, December.
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  13. Marie Allard & Izabela Jelovac & Pierre-Thomas Léger, 2010. "Physicians self selection of a payment mechanism: Capitation versus fee-for-service," Post-Print halshs-00523370, HAL.
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