Treatment and referral decisions under different physician payment mechanisms

Marie Allard, Izabela Jelovac and Pierre Thomas Léger

Journal of Health Economics, 2011, vol. 30, issue 5, 880-893

Abstract: This paper analyzes and compares the incentive properties of some common payment mechanisms for GPs, namely fee for service (FFS), capitation and fundholding. It focuses on gatekeeping GPs and it specifically recognizes GPs heterogeneity in both ability and altruism. It also allows inappropriate care by GPs to lead to more serious illnesses. The results are as follows. Capitation is the payment mechanism that induces the most referrals to expensive specialty care. Fundholding may induce almost as much referrals as capitation when the expected costs of GPs care are high relative to those of specialty care. Although driven by financial incentives of different nature, the strategic behaviors associated with fundholding and FFS are very much alike. Finally, whether a regulator should use one or another payment mechanism for GPs will depend on (i) his priorities (either cost-containment or quality enhancement) which, in turn, depend on the expected cost difference between GPs care and specialty care, and (ii) the distribution of profiles (diagnostic ability and altruism levels) among GPs.

Keywords: Ability; Altruism; Capitation; Fee for service; Fundholding (search for similar items in EconPapers)
JEL-codes: I18 M52 (search for similar items in EconPapers)
Date: 2011
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (50)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:jhecon:v:30:y:2011:i:5:p:880-893

DOI: 10.1016/j.jhealeco.2011.05.016

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