Specialist payment schemes and patient selection in private and public hospitals, CHERE Discussion Paper No 54
It has been observed that specialist physicians who work in private hospitals are usually paid by fee-for-service while specialist physicians who work in public hospitals are usually paid by salary. This paper provides an explanation for this observation. Essentially, fee-for-service aligns the interests of income preferring specialist with profit maximizing private hospitals and results in private hospitals treating a high proportion of short stay patients. On the other hand, salary aligns the interests of fairness preferring specialists with welfare maximizing public hospital and results in public hospitals treating all patients irrespective of their length of stay.
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