Outcome Versus Service Based Payment in Health Care: Lessons from African Traditional Healers

37 Pages Posted: 23 Jun 2003

See all articles by Kenneth L. Leonard

Kenneth L. Leonard

University of Maryland

Joshua Graff Zivin

Columbia University - Department of Health Policy and Management; National Bureau of Economic Research (NBER)

Date Written: June 2003

Abstract

We compare the more common physician compensation method of fee-for-service to the less common payment-for-outcomes method. This paper combines an investigation of the theoretical properties of both of these payment regimes with a unique data set from rural Cameroon in which patients can choose between outcome and service based payments. We show that consideration of the role of patient effort in the production of health leads to important differences in the performance of these contracts. Theory and empirical evidence show that when illnesses require (or are responsive to) large amounts of both patient and practitioner effort, outcome based payment schemes are superior to effort based schemes. The traditional healer -- a practitioner who offers health services on an outcome-contingent basis -- is advanced as an important example of how patient effort can be better understood and tapped in health care.

Suggested Citation

Leonard, Kenneth L. and Zivin, Joshua Graff, Outcome Versus Service Based Payment in Health Care: Lessons from African Traditional Healers (June 2003). NBER Working Paper No. w9797, Available at SSRN: https://ssrn.com/abstract=418299

Kenneth L. Leonard

University of Maryland ( email )

Symmons Hall, Rm 2200
University of Maryland
College Park, MD 20742-5535
United States

HOME PAGE: http://faculty.arec.umd.edu/kleonard/

Joshua Graff Zivin (Contact Author)

Columbia University - Department of Health Policy and Management ( email )

600 West 168th Street, 6th Floor
New York, NY 10032
United States

National Bureau of Economic Research (NBER)

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Cambridge, MA 02138
United States

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