Physicians’ incentives, patients’ characteristics, and quality of care: a systematic experimental comparison of performance-pay systems

Jeannette Brosig-Koch (), Mona Groß (), Heike Hennig-Schmidt (), Nadja Kairies-Schwarz () and Daniel Wiesen ()
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Jeannette Brosig-Koch: Otto von Guericke University Magdeburg
Mona Groß: University of Cologne
Heike Hennig-Schmidt: University of Bonn
Nadja Kairies-Schwarz: Heinrich Heine University Düsseldorf
Daniel Wiesen: University of Cologne

International Journal of Health Economics and Management, 2025, vol. 25, issue 2, No 3, 217-243

Abstract: Abstract How performance pay affects physicians’ medical service provision and the quality of care is relevant for researchers and policy-makers alike. This paper systematically studies how performance pay, complementing either fee-for-service or capitation, affects physicians’ medical service provision and the quality of care for heterogeneous patients. Using a series of controlled behavioral experiments with physicians and students, we test the incentive effect of performance pay at a within-subject level. We consider a performance pay scheme which grants a discrete bonus if a quality threshold is reached, which varies with the patients’ severity of illness. We find that performance pay significantly reduces non-optimal service provision and enhances the quality of care. Effect sizes depend on the patients’ severity of illness and whether performance pay is blended with fee-for-service or capitation. Health policy implications, including a cost benefit analysis of introducing performance pay, are discussed.

Keywords: Pay for performance; Fee-for-service; Capitation; Treatment quality; Heterogeneous patients; Laboratory experiment (search for similar items in EconPapers)
JEL-codes: C91 C93 I11 (search for similar items in EconPapers)
Date: 2025
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DOI: 10.1007/s10754-025-09390-x

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