The effects of competition on medical service provision

Jeannette Brosig-Koch, Burkhard Hehenkamp and Johanna Kokot

No 647, Ruhr Economic Papers from RWI - Leibniz-Institut für Wirtschaftsforschung, Ruhr-University Bochum, TU Dortmund University, University of Duisburg-Essen

Abstract: We explore how competition between physicians affects medical service provision. Previous research has shown that, without competition, physicians deviate from patient-optimal treatment under payment systems like capitation and fee-for-service. While competition might reduce these distortions, physicians usually interact with each other repeatedly over time and only a fraction of patients switches providers at all. Both patterns might prevent competition to work in the desired direction. To analyze the behavioral effects of competition, we develop a theoretical benchmark which is then tested in a controlled laboratory experiment. Experimental conditions vary physician payment and patient characteristics. Real patients benefit from treatment decisions made in the experiment. Our results reveal that, in line with the theoretical prediction, introducing competition can reduce overprovision and underprovision, respectively. The observed effects depend on patient characteristics and the payment system, though. Tacit collusion is observed and particularly pronounced with fee-for-service payment, but it appears to be less frequent than in related experimental research on price competition.

Keywords: physician competition; fee-for-service; capitation; laboratory experiment (search for similar items in EconPapers)
JEL-codes: C72 C91 D43 I11 (search for similar items in EconPapers)
Date: 2016
New Economics Papers: this item is included in nep-com, nep-exp, nep-hea and nep-reg
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

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Related works:
Journal Article: The effects of competition on medical service provision (2017)
Working Paper: The effects of competition on medical service provision (2016)
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Persistent link: https://EconPapers.repec.org/RePEc:zbw:rwirep:647

DOI: 10.4419/86788753

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