The Effects of Introducing Mixed Payment Systems for Physicians – Experimental Evidence

36 Pages Posted: 25 Mar 2015

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: February 23, 2015

Abstract

Mixed payment systems have become a prominent alternative to paying physicians through fee-for-service and capitation. While theory shows mixed payment systems to be superior, empirically, causal effects on physicians’ behavior are not well understood when introducing mixed systems. We systematically analyze the influence of fee-for-service, capitation, and mixed payment systems on physicians’ service provision. In a controlled laboratory setting, we implement an exogenous variation of the payment method. Participants, in the role of physicians, in the lab (N=213) choose quantities of medical services affecting patients’ health outside the lab. Behavioral data reveal significant over-provision of medical services under fee-for-service and significant under-provision under capitation, though less than predicted when assuming profit-maximization. Introducing mixed payment systems significantly reduces deviations from patient-optimal treatment. Responses to incentive systems can be explained by a behavioral model capturing physician altruism. We find substantial heterogeneity in physician altruism. Our results hold for medical and non-medical students.

Keywords: Fee-for-service; capitation; mixed payment systems; physician altruism; laboratory experiment

JEL Classification: C91, I11

Suggested Citation

Brosig-Koch, Jeannette and Henning-Schmidt, Heike and Kairies-Schwarz, Nadja and Wiesen, Daniel, The Effects of Introducing Mixed Payment Systems for Physicians – Experimental Evidence (February 23, 2015). Ruhr Economic Paper No. 543, Available at SSRN: https://ssrn.com/abstract=2583801 or http://dx.doi.org/10.2139/ssrn.2583801

Jeannette Brosig-Koch

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 (Contact Author)

University of Cologne ( email )

Albertus-Magnus-Platz
Cologne, 50923
Germany

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