How Payment Systems Affect Physicians' Provision Behavior - An Experimental Investigation

34 Pages Posted: 7 Aug 2009

See all articles by Heike Hennig‐Schmidt

Heike Hennig‐Schmidt

University of Bonn - Laboratory for Experimental Economics

Reinhard Selten

University of Bonn - Economic Science Area; CESifo (Center for Economic Studies and Ifo Institute)

Daniel Wiesen

University of Cologne

Date Written: July 23, 2009

Abstract

A central concern in health economics is to understand the influence of commonly used physician payment systems. We introduce a controlled laboratory experiment to analyze the influence of fee-for-service (FFS) and capitation (CAP) payments on physicians' behavior. Medical students decide as experimental physicians on the quantity of medical services. Real patients gain a monetary benefit from their choices. Our main findings are that patients are overserved in FFS and underserved in CAP. Financial incentives are not the only motivation for physicians' quantity decisions, though. The patient benefit is of considerable importance as well. Patients are affected differently by the two payment systems. Those in need of a low level of medical services are better off under CAP, whereas patients with a high need of medical services gain more health benefit when physicians are paid by FFS.

Keywords: Physician payment system, laboratory experiment, incentives, fee-for-service, capitation

JEL Classification: C91, I11

Suggested Citation

Henning-Schmidt, Heike and Selten, Reinhard and Wiesen, Daniel, How Payment Systems Affect Physicians' Provision Behavior - An Experimental Investigation (July 23, 2009). Available at SSRN: https://ssrn.com/abstract=1444069 or http://dx.doi.org/10.2139/ssrn.1444069

Heike Henning-Schmidt

University of Bonn - Laboratory for Experimental Economics ( email )

Adenauerallee 24-42
Bonn, 53113
Germany

Reinhard Selten

University of Bonn - Economic Science Area ( email )

Adenauerallee 24-42
D-53113 Bonn
Germany
++49-228 73-9190 (Phone)
++49-228 73-9193 (Fax)

CESifo (Center for Economic Studies and Ifo Institute)

Poschinger Str. 5
Munich, DE-81679
Germany

Daniel Wiesen (Contact Author)

University of Cologne ( email )

Albertus-Magnus-Platz
Cologne, 50923
Germany

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