Quality and Accountability in Healthcare Delivery: Audit-Study Evidence from Primary Care in India

We present the first direct evidence on the relative quality of public and private healthcare in a low-income setting, using a unique set of audit studies. We sent standardized (fake) patients to rural primary care providers in the Indian state of Madhya Pradesh, and recorded the quality of care provided and prices charged in each interaction. We report three main findings. First, most private providers lacked formal medical training, but they spent more time with patients and completed more essential checklist items than public providers, and were equally likely to provide a correct treatment. Second, we compare the performance of qualified public doctors across their public and private practices, and find that the same doctors exerted higher effort and were more likely to provide a correct treatment in their private practices. Third, in the private sector, we find that prices charged are positively correlated with provider effort and correct treatment, but also with unnecessary treatments. In the public sector, we find no correlation between provider salaries and any measure of quality. We develop a simple theoretical framework to interpret our results and show that in settings with low levels of effort in the public sector, the benefits of higher diagnostic effort in the private sector may outweigh the costs of market incentives to over treat. These differences in provider effort may partly explain the dominant market share of fee-charging private providers even in the presence of a system of free public healthcare.