Optimal Health Care Contracts under Physician Agency

Philippe Chone () and Ching-to Albert Ma ()
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Philippe Chone: CREST-LEI and CNRS URA 2200

No WP2007-041, Boston University - Department of Economics - Working Papers Series from Boston University - Department of Economics

Abstract: We examine contracts between insurers and physicians when the treatment is chosen to maximize a combination of physician profit and patient benefit (“physician agency”). The degree of substitution between doctor profit and patient benefit in the physician-patient coalition is the physician’s private information, as is the patient’s intrinsic valuation of treatment quantity. The equilibrium mechanism only depends on the physician-patient coalition parameter. Moreover, the equilibrium mechanism exhibits extensive pooling, with prescribed quantity and physician reimbursement being insensitive to the agency characteristics or patient’s actual benefit. The optimal mechanism is interpreted as managed care where strict approval protocols are placed on treatments.

Keywords: physician agency; optimal payment; health care quantity; managed care; minimum profit; asymmetric information (search for similar items in EconPapers)
JEL-codes: D82 I1 I10 L15 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-cta and nep-hea
Date: 2007-01, Revised 2007-09
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