Sorting into Physician Payment Schemes – A Laboratory Experiment

Jeannette Brosig-Koch, Nadja Kairies-Schwarz and Johanna Kokot

No 529, Ruhr Economic Papers from RWI - Leibniz-Institut für Wirtschaftsforschung, Ruhr-University Bochum, TU Dortmund University, University of Duisburg-Essen

Abstract: Most common physician payment schemes include some form of traditional capitation or fee-for-service payment. While health economics research often focuses on direct incentive effects of these payments, we demonstrate that the opportunity to sort into one's preferred payment scheme may also significantly affect medical treatment. Our study is based on an experiment testing individual sorting into fee-for-service and capitation payment under controlled laboratory conditions. A sequential design allows differentiating between sorting and incentive effects. We find a strong preference for fee-for-service payment, independent of subjects' prior experience with one of the two payment schemes. Our behavioral classification reveals that subjects who select into capitation deviate less from patient-optimal treatment than those who prefer fee-for-service payment. Moreover, comparing subjects' behavior before and after introducing the choice option, we find that subjects preferring fee-for-service become even less patient-oriented after this introduction. As a result, the opportunity to choose a payment scheme does not improve, but - if at all - worsens patient treatment in our experiment. Our findings stress the importance of acknowledging potential sorting and incentive effects in the analysis of physician payment schemes.

Keywords: physician incentives; fee-for-service; capitation; payment choice; sorting effects; laboratory experiment (search for similar items in EconPapers)
JEL-codes: C91 D84 E03 (search for similar items in EconPapers)
Date: 2014
New Economics Papers: this item is included in nep-exp, nep-hea and nep-hrm
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Persistent link: https://EconPapers.repec.org/RePEc:zbw:rwirep:529

DOI: 10.4419/86788606

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