Sticking Points: Common-Agency Problems and Contracting in the U.S. Healthcare System
Michael Powell and
James Rebitzer ()
No 23177, NBER Working Papers from National Bureau of Economic Research, Inc
We propose a "common-agency" model for explaining inefficient contracting in the U.S. healthcare system. In our setting, common-agency problems arise when multiple payers seek to motivate a shared provider to invest in improved care coordination. Our approach differs from other common-agency models in that we analyze "sticking points," that is, equilibria in which payers coordinate around Pareto-dominated contracts that do not offer providers incentives to implement efficient investments. These sticking points offer a straightforward explanation for three long observed but hard to explain features of the U.S. healthcare system: the ubiquity of fee-for-service contracting arrangements outside of Medicare; problematic care coordination; and the historic reliance on small, single specialty practices rather than larger multi-specialty group practices to deliver care. The common-agency model also provides insights on the effects of policies, such as Accountable Care Organizations, that aim to promote more efficient forms of contracting between payers and providers.
JEL-codes: D8 I10 I18 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-cta and nep-hea
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1) Track citations by RSS feed
Published as Brigham Frandsen & Michael Powell & James B. Rebitzer, 2019. "Sticking points: common‐agency problems and contracting in the US healthcare system," The RAND Journal of Economics, vol 50(2), pages 251-285.
Downloads: (external link)
Journal Article: Sticking points: common‐agency problems and contracting in the US healthcare system (2019)
This item may be available elsewhere in EconPapers: Search for items with the same title.
Export reference: BibTeX
RIS (EndNote, ProCite, RefMan)
Persistent link: https://EconPapers.repec.org/RePEc:nbr:nberwo:23177
Ordering information: This working paper can be ordered from
Access Statistics for this paper
More papers in NBER Working Papers from National Bureau of Economic Research, Inc National Bureau of Economic Research, 1050 Massachusetts Avenue Cambridge, MA 02138, U.S.A.. Contact information at EDIRC.
Bibliographic data for series maintained by ().