Sorting into Physician Payment Schemes – A Laboratory Experiment

23 Pages Posted: 1 Apr 2015

See all articles by Jeannette Brosig-Koch

Jeannette Brosig-Koch

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

Nadja Kairies-Schwarz

CINCH / University of Duisburg Essen

Johanna Kokot

University of Hamburg; Hamburg Center for Health Economics

Date Written: December 17, 2014

Abstract

Most common physician payment schemes include some form of traditional capitation or fee-for-service payment. While health economics research often focuses on direct incentive effects of these payments, we demonstrate that the opportunity to sort into one’s preferred payment scheme may also significantly affect medical treatment. Our study is based on an experiment testing individual sorting into fee-for-service and capitation payment under controlled laboratory conditions. A sequential design allows differentiating between sorting and incentive effects. We find a strong preference for fee-for-service payment, independent of subjects’ prior experience with one of the two payment schemes. Our behavioral classification reveals that subjects who select into capitation deviate less from patient-optimal treatment than those who prefer fee-for-service payment. Moreover, comparing subjects’ behavior before and after introducing the choice option, we find that subjects preferring fee-for-service become even less patient-oriented after this introduction. As a result, the opportunity to choose a payment scheme does not improve, but - if at all - worsens patient treatment in our experiment. Our findings stress the importance of acknowledging potential sorting and incentive effects in the analysis of physician payment schemes.

Keywords: physician incentives; fee-for-service; capitation; payment choice; sorting eff ects; laboratory experiment

JEL Classification: C91, D84, E03

Suggested Citation

Brosig-Koch, Jeannette and Kairies-Schwarz, Nadja and Kokot, Johanna, Sorting into Physician Payment Schemes – A Laboratory Experiment (December 17, 2014). Ruhr Economic Paper No. 529, Available at SSRN: https://ssrn.com/abstract=2566263 or http://dx.doi.org/10.2139/ssrn.2566263

Jeannette Brosig-Koch (Contact Author)

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

Universitätsstr. 9
Essen, 45141
Germany

Nadja Kairies-Schwarz

CINCH / University of Duisburg Essen ( email )

Berliner Platz 6-8
Essen, 47048
Germany

Johanna Kokot

University of Hamburg ( email )

Esplanade 36
Hamburg, DE 20354
Germany

Hamburg Center for Health Economics ( email )

Esplanade 36
Hamburg, DE 20354
Germany

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