Physician Payment Contracts In The Presence Of Moral Hazard And Adverse Selection: Theory And Application To Ontario

Jasmin Kantarevic and Boris Kralj

No 150001, Working Papers from Canadian Centre for Health Economics

Abstract: We develop a simple principal-agent model with moral hazard and adverse selection to provide a unified framework for understanding some of the most salient features of the recent physician payment reform in Ontario and its impact on physician behaviour. These features include: (1) physicians can choose a payment contract from a menu that includes an enhanced fee-for-service contract and a blended capitation contract; (2) the capitation rate is higher and the cost-reimbursement rate is lower in the blended capitation contract; (3) physicians sort selectively into the contracts based on their initial productivity; (4) all else equal, physicians in the blended capitation model provide fewer services than physicians in the enhanced fee-for-service model.

Keywords: physician remuneration; moral hazard; adverse selection; Ontario (search for similar items in EconPapers)
JEL-codes: I10 I12 I18 (search for similar items in EconPapers)
Pages: 30 pages
Date: 2015-01
New Economics Papers: this item is included in nep-hea and nep-hrm
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Published Online, January 2015

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Persistent link: https://EconPapers.repec.org/RePEc:cch:wpaper:150001

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