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Physician Incentives In Managed Care Organizations: Medical Practice Norms and the Quality of Care


  • David J. Cooper
  • James B. Rebitzer


This brief considers the interaction between physician incentive systems and product market competition in the delivery of medical services via managed care organizations. At the center of the analysis is the process by which health maintenance organizations (HMOs) assemble physician networks and the role these networks play in the competition for customers. The authors find that although physician practice styles respond to financial incentives, there is little evidence that HMO cost-containment incentives cause a discernable reduction in care quality. They propose a model of the managed care marketplace that solves for both physician incentive contracts and HMO product market strategies in an environment of extreme information asymmetry: physicians perceive the quality of care they offer perfectly and their patients do not perceive it at all.

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  • David J. Cooper & James B. Rebitzer, "undated". "Physician Incentives In Managed Care Organizations: Medical Practice Norms and the Quality of Care," Economics Public Policy Brief Archive ppb_70, Levy Economics Institute.
  • Handle: RePEc:lev:levppb:ppb_70

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    References listed on IDEAS

    1. Martin Gaynor & James Rebitzer & Lowell Taylor, "undated". "Incentives in HMOs," GSIA Working Papers 2003-E21, Carnegie Mellon University, Tepper School of Business.
    2. Altman, Daniel & Cutler, David & Zeckhauser, Richard, 2003. "Enrollee mix, treatment intensity, and cost in competing indemnity and HMO plans," Journal of Health Economics, Elsevier, vol. 22(1), pages 23-45, January.
    3. David J. Cooper & James B. Rebitzer, 2002. "Managed Care, Physician Incentives, and Norms of Medical," Microeconomics 0209001, EconWPA.
    4. Gruber, Jonathan & McKnight, Robin, 2003. "Why did employee health insurance contributions rise?," Journal of Health Economics, Elsevier, vol. 22(6), pages 1085-1104, November.
    5. Kahneman, Daniel & Schkade, David & Sunstein, Cass R, 1998. "Shared Outrage and Erratic Awards: The Psychology of Punitive Damages," Journal of Risk and Uncertainty, Springer, vol. 16(1), pages 49-86, April.
    6. David M. Cutler & Mark McClellan & Joseph P. Newhouse, 2000. "How Does Managed Care Do It?," RAND Journal of Economics, The RAND Corporation, vol. 31(3), pages 526-548, Autumn.
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