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Money talks: Paying physicians for performance

Listed author(s):
  • Keser, Claudia
  • Peterle, Emmanuel
  • Schnitzler, Cornelius

Pay-for-performance attempts to tie physician payment to quality of care. In a controlled laboratory experiment, we investigate the effect of pay-for-performance on physician provision behavior and patient benefit. For that purpose, we compare a traditional fee-for-service payment system to a hybrid system that blends fee-for-service and pay-for-performance incentives. Physicians are found to respond to pay-for-performance incentives. Approximately 89 percent of the participants qualify for a pay-for-performance bonus payment in the experiment. It follows that a patient treated under the hybrid payment system is significantly more likely to receive optimal treatment than a similar fee-for-service patient. Pay-for-performance generally tends to alleviate over- and under-provision of medical treatment relative to fee-for-service. Irrespective of the payment system, we observe unethical treatment behavior, i.e., the provision of medical services with zero benefit to the patient.

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File URL: https://www.econstor.eu/bitstream/10419/103877/1/804406316.pdf
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Paper provided by University of Goettingen, Department of Economics in its series Center for European, Governance and Economic Development Research Discussion Papers with number 173 [rev.].

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Date of creation: 2014
Handle: RePEc:zbw:cegedp:173r
Contact details of provider: Postal:
Platz der Göttinger Sieben 3, 37073 Göttingen

Web page: http://www.cege.wiso.uni-goettingen.de/

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  1. Hennig-Schmidt, Heike & Selten, Reinhard & Wiesen, Daniel, 2011. "How payment systems affect physicians' provision behaviour--An experimental investigation," Journal of Health Economics, Elsevier, vol. 30(4), pages 637-646, July.
  2. Holmstrom, Bengt & Milgrom, Paul, 1991. "Multitask Principal-Agent Analyses: Incentive Contracts, Asset Ownership, and Job Design," Journal of Law, Economics and Organization, Oxford University Press, vol. 7(0), pages 24-52, Special I.
  3. Sicsic, Jonathan & Le Vaillant, Marc & Franc, Carine, 2012. "Intrinsic and extrinsic motivations in primary care: An explanatory study among French general practitioners," Health Policy, Elsevier, vol. 108(2), pages 140-148.
  4. Kathleen J. Mullen & Richard G. Frank & Meredith B. Rosenthal, 2010. "Can you get what you pay for? Pay-for-performance and the quality of healthcare providers," RAND Journal of Economics, RAND Corporation, vol. 41(1), pages 64-91.
  5. Jinhu Li & Jeremiah Hurley & Philip DeCicca & Gioia Buckley, 2014. "Physician Response To Pay‐For‐Performance: Evidence From A Natural Experiment," Health Economics, John Wiley & Sons, Ltd., vol. 23(8), pages 962-978, August.
  6. Urs Fischbacher, 2007. "z-Tree: Zurich toolbox for ready-made economic experiments," Experimental Economics, Springer;Economic Science Association, vol. 10(2), pages 171-178, June.
  7. Hugh Gravelle & Matt Sutton & Ada Ma, 2010. "Doctor Behaviour under a Pay for Performance Contract: Treating, Cheating and Case Finding?," Economic Journal, Royal Economic Society, vol. 120(542), pages 129-156, February.
  8. Alan Maynard, 2012. "The powers and pitfalls of payment for performance," Health Economics, John Wiley & Sons, Ltd., vol. 21(1), pages 3-12, January.
  9. repec:dau:papers:123456789/14768 is not listed on IDEAS
  10. Falk, Armin & Fehr, Ernst, 2003. "Why labour market experiments?," Labour Economics, Elsevier, vol. 10(4), pages 399-406, August.
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