How Effective are Pay-for-Performance Incentives for Physicians? - A Laboratory Experiment

36 Pages Posted: 18 Jun 2013

See all articles by Jeannette Brosig-Koch

Jeannette Brosig-Koch

University of Duisburg-Essen - Department of Economics and Business Administration

Heike Hennig‐Schmidt

University of Bonn - Laboratory for Experimental Economics

Nadja Kairies-Schwarz

CINCH / University of Duisburg Essen

Daniel Wiesen

University of Cologne

Date Written: April 2, 2013

Abstract

Recent reforms in health care have introduced a variety of pay-for-performance programs using financial incentives for physicians to improve the quality of care. Their effectiveness is, however, ambiguous as it is often difficult to disentangle the effect of financial incentives from the ones of various other simultaneous changes in the system. In this study we investigate the effects of introducing financial pay-for-performance incentives with the help of controlled laboratory experiments. In particular, we use fee-for-service and capitation as baseline payment schemes and test how additional pay-for-performance incentives affect the medical treatment of different patient types. Our results reveal that, on average, patients significantly benefit from introducing pay-for performance, independently of whether it is combined with capitation or fee-for-service incentives. The magnitude of this effect is significantly influenced by the patient type, though. These results hold for medical and non-medical students. A cost-benefit analysis further demonstrates that, overall, the increase in patient benefits cannot overcompensate the additional costs associated with pay-for-performance. Moreover, our analysis of individual data reveals different types of responses to pay-for-performance incentives. We find some indication that pay-for performance might crowd out the intrinsic motivation to care for patients. These insights help to understand the effects caused by introducing pay-for-performance schemes.

Keywords: Physician incentive schemes, pay-for-performance, fee-for-service, capitation, laboratory experiment

JEL Classification: C91, I11

Suggested Citation

Brosig-Koch, Jeannette and Henning-Schmidt, Heike and Kairies-Schwarz, Nadja and Wiesen, Daniel, How Effective are Pay-for-Performance Incentives for Physicians? - A Laboratory Experiment (April 2, 2013). Available at SSRN: https://ssrn.com/abstract=2278863 or http://dx.doi.org/10.2139/ssrn.2278863

Jeannette Brosig-Koch (Contact Author)

University of Duisburg-Essen - Department of Economics and Business Administration ( email )

Universitätsstr. 9
Essen, 45141
Germany

Heike Henning-Schmidt

University of Bonn - Laboratory for Experimental Economics ( email )

Adenauerallee 24-42
Bonn, 53113
Germany

Nadja Kairies-Schwarz

CINCH / University of Duisburg Essen ( email )

Berliner Platz 6-8
Essen, 47048
Germany

Daniel Wiesen

University of Cologne ( email )

Albertus-Magnus-Platz
Cologne, 50923
Germany

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