Payment systems in the healthcare industry: An experimental study of physician incentives

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    49 Scopus citations


    Policy makers and the healthcare industry have proposed changes to physician payment structures as a way to improve the quality of health care and reduce costs. Several of these proposals require healthcare providers to employ a value-based purchasing program (also known as pay-for-performance [P4P]). However, the way in which existing payment structures impact physician behavior is unclear and therefore, predicting how well P4P will perform is difficult. To understand the impact physician payment structures have on physician behavior, I approximate the physician-patient relationship in a real-effort laboratory experiment. I study several prominent physician payment structures including fee-for-service, capitation, salary, and P4P. I find that physicians are intrinsically motivated to provide high quality care and relying exclusively on extrinsic incentives to motivate physicians is detrimental to the quality of care and costly for the healthcare industry.

    Original languageEnglish (US)
    Pages (from-to)367-378
    Number of pages12
    JournalJournal of Economic Behavior and Organization
    StatePublished - Oct 1 2014


    • Capitation
    • Fee-for-service
    • Laboratory experiment
    • Pay-for-performance
    • Physician payment system
    • Salary

    ASJC Scopus subject areas

    • Economics and Econometrics
    • Organizational Behavior and Human Resource Management


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