Monitoring Institutions in Health Care Markets: Experimental Evidence

50 Pages Posted: 3 Jun 2019 Last revised: 27 Feb 2020

See all articles by Silvia Angerer

Silvia Angerer

UMIT - University for Health Sciences, Medical Informatics and Technology

Daniela Glätzle-Rützle

University of Innsbruck - Department of Public Finance

Christian Waibel

ETH Zürich - CER-ETH - Center of Economic Research at ETH Zurich

Date Written: February 26, 2020

Abstract

This paper investigates the impact of monitoring institutions on market outcomes in health care. Health care markets are characterized by asymmetric information. Physicians have an information advantage over patients with respect to the appropriate treatment for the patient and may exploit this informational advantage by over- and underprovision as well as by overcharging. We introduce two types of costly monitoring, endogenous and exogenous. When monitoring detects misbehavior, physicians have to pay a fine. Endogenous monitoring can be requested by patients, whereas exogenous monitoring is performed randomly by a third party. We present a toy model that enables us to derive hypotheses and to test them in a laboratory experiment. Our results show that introducing endogenous monitoring reduces the level of undertreatment and overcharging. Even under high monitoring costs, the threat of patient monitoring is sufficient to discipline physicians. Introducing exogenous monitoring also reduces undertreatment and overcharging when it is performed sufficiently frequently. Market efficiency increases when endogenous monitoring is introduced as well as when exogenous monitoring is implemented with sufficient frequency. Our results, therefore, suggest that monitoring may be a feasible instrument to improve outcomes in health care markets.

Keywords: credence goods, physician behavior, undertreatment, overtreatment, overcharging, monitoring, laboratory experiment

JEL Classification: C91, D82, I11

Suggested Citation

Angerer, Silvia and Glätzle-Rützle, Daniela and Waibel, Christian, Monitoring Institutions in Health Care Markets: Experimental Evidence (February 26, 2020). Available at SSRN: https://ssrn.com/abstract=3372994 or http://dx.doi.org/10.2139/ssrn.3372994

Silvia Angerer (Contact Author)

UMIT - University for Health Sciences, Medical Informatics and Technology ( email )

Eduard-Wallnöfer-Zentrum 1
Hall, Tirol 6060
Austria

Daniela Glätzle-Rützle

University of Innsbruck - Department of Public Finance ( email )

Innrain 52
Innsbruck, 6020
Austria

Christian Waibel

ETH Zürich - CER-ETH - Center of Economic Research at ETH Zurich ( email )

Zürichbergstrasse 18
Zurich, 8092
Switzerland

Here is the Coronavirus
related research on SSRN

Paper statistics

Downloads
72
Abstract Views
529
rank
356,865
PlumX Metrics