Incentives In HMOs

Martin Gaynor (), James B. Rebitzer () and Lowell J. Taylor
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Lowell J. Taylor: Carnegie Mellon University

Macroeconomics from EconWPA

Abstract: We studied the effect of physician incentives in an HMO network. Physician incentives are controversial because they may induce doctors to make treatment decisions that differ from those they would choose in the absence of incentives. We set out a theoretical framework for assessing the degree to which incentive contracts do, in fact, induce physicians to deviate from a standard, guided only by patient interest and professional medical judgment. Our empirical evaluation of the model relies on details of the HMO's incentive contracts and access to the firms' internal expenditure records. We estimate that the HMO's incentive contract provides a typical physician an increase, at the margin, of $.10 in income for each $1.00 reduction in medial utilization expenditures. The average response is a 5-percent reduction in medical expenditures. We also find suggestive evidence that financial incentives linked to commonly used "quality" measures may stimulate an improvement in measured quality.

JEL-codes: E (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-ent, nep-hea, nep-ias and nep-net
Date: 2001-11-01
Note: Type of Document - Acrobat Adobe PDF; prepared on IBM PC; to print on PostScript; pages: 46; figures: included
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http://129.3.20.41/eps/mac/papers/0111/0111001.pdf (application/pdf)

Related works:
Working Paper: Incentives in HMOs (2001)
Working Paper: Incentives in HMO's (2002)
Working Paper: Incentives in HMOs
Working Paper: Incentives In HMOs (2001)
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Persistent link: http://EconPapers.repec.org/RePEc:wpa:wuwpma:0111001

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