Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/330547 
Year of Publication: 
2025
Citation: 
[Journal:] International Journal of Health Economics and Management [ISSN:] 2199-9031 [Volume:] 25 [Issue:] 2 [Publisher:] Springer US [Place:] New York, NY [Year:] 2025 [Pages:] 217-243
Publisher: 
Springer US, New York, NY
Abstract: 
How performance pay affects physicians' medical service provision and the quality of care is relevant for researchers and policy-makers alike. This paper systematically studies how performance pay, complementing either fee-for-service or capitation, affects physicians' medical service provision and the quality of care for heterogeneous patients. Using a series of controlled behavioral experiments with physicians and students, we test the incentive effect of performance pay at a within-subject level. We consider a performance pay scheme which grants a discrete bonus if a quality threshold is reached, which varies with the patients' severity of illness. We find that performance pay significantly reduces non-optimal service provision and enhances the quality of care. Effect sizes depend on the patients' severity of illness and whether performance pay is blended with fee-for-service or capitation. Health policy implications, including a cost benefit analysis of introducing performance pay, are discussed.
Subjects: 
Pay for performance
Fee-for-service
Capitation
Treatment quality
Heterogeneous patients
Laboratory experiment
JEL: 
C91
C93
I11
Persistent Identifier of the first edition: 
Creative Commons License: 
cc-by Logo
Document Type: 
Article
Document Version: 
Published Version

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