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Physician performance pay: Evidence from a laboratory experiment

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  • Brosig-Koch, Jeannette
  • Hennig-Schmidt, Heike
  • Kairies-Schwarz, Nadja
  • Wiesen, Daniel

Abstract

We present causal evidence from a controlled experiment on the effect of pay for performance on physicians' behavior and patients' health benefits. At a within-subject level, we introduce performance pay to complement either fee-for-service or capitation. Performance pay is granted if a health care quality threshold is reached, and varies with the patients' severity of illness. We find that performance pay significantly reduces overprovision of medical services due to fee-for-service incentives, and underprovision due to capitation; on average, it increases the patients' health benefit. The magnitude of these effects depends, however, on the patients' characteristics. We also find evidence for a crowding-out of patient-regarding behavior due to performance pay. Health policy implications are discussed.

Suggested Citation

  • Brosig-Koch, Jeannette & Hennig-Schmidt, Heike & Kairies-Schwarz, Nadja & Wiesen, Daniel, 2016. "Physician performance pay: Evidence from a laboratory experiment," Ruhr Economic Papers 658, RWI - Leibniz-Institut für Wirtschaftsforschung, Ruhr-University Bochum, TU Dortmund University, University of Duisburg-Essen.
    • Handle: RePEc:zbw:rwirep:658
    DOI: 10.4419/86788764
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    References listed on IDEAS

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    3. Waibel, Christian & Wiesen, Daniel, 2021. "An experiment on referrals in health care," European Economic Review, Elsevier, vol. 131(C).

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    More about this item

    Keywords

    Fee-for-service; capitation; pay for performance; laboratory experiment; crowding-out;
    All these keywords.

    JEL classification:

    • C91 - Mathematical and Quantitative Methods - - Design of Experiments - - - Laboratory, Individual Behavior
    • I11 - Health, Education, and Welfare - - Health - - - Analysis of Health Care Markets

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