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How to Compensate Physicians When Both Patient and Physician Effort Are Unobservable

Kenneth L. Leonard; Joshua Zivin

Title:
How to Compensate Physicians When Both Patient and Physician Effort Are Unobservable
Author(s):
Leonard, Kenneth L.
Zivin, Joshua
Date:
Type:
Working papers
Department:
Economics
Permanent URL:
Series:
Department of Economics Discussion Papers
Part Number:
9900-01
Abstract:
In this paper, we construct a joint production model of health with two sided asymmetric information and ask the question, "How should physicians be compensated?" We demonstrate theoretically that the preferred physician compensation scheme depends on the illness condition. Outcome-contingent payments are better than effort-contingent payments for illnesses in which the efforts of physicians and patients are highly complementary, or in which both types of effort are important to the outcome. Effort-contingent payments are superior when efforts are not highly complementary, or when either physician or patient effort, but not both are important to the outcome. Evidence to support this theory is provided by an empirical analysis of patient choice of health care providers in Africa
Subject(s):
Economics
Item views:
243
Metadata:
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