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Payment Systems in the Healthcare Industry: An Experimental Study Of Physician Incentives

Ellen Green

No 13-05, Working Papers from University of Delaware, Department of Economics

Abstract: Policy makers and the healthcare industry have proposed changes to physician payment structures as a way to improve the quality of health care and reduce costs. Several of these proposals require healthcare providers to employ a valuebased purchasing program (also known as pay-for-performance [P4P]). However, the way in which existing payment structures impact physician behavior is unclear and, therefore, predicting how well P4P will perform is difficult. To understand the impact physician payment structures have on physician behavior, I approximate the physician-patient relationship in a real-effort laboratory experiment. I study several prominent physician payment structures including feefor- service, capitation, salary, and P4P. I find that physicians are intrinsically motivated to provide high quality care and relying exclusively on extrinsic incentives to motivate physicians is detrimental to the quality of care and costly for the healthcare industry.

Keywords: Physician Payment System; Laboratory Experiment; Incentives; Fee-for-Service; Capitation; Salary; Report Cards; Pay-for-Performance; Crowd Out (search for similar items in EconPapers)
JEL-codes: C9 I1 (search for similar items in EconPapers)
Pages: 27 pages
Date: 2013
New Economics Papers: this item is included in nep-exp, nep-hea and nep-hrm
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