Physician Motivation and the Structure of Incentives in Prepaid Group Practice: A Theoretical and Empirical Study
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Date
1989-12
Authors
Tinkler, Sarah Elizabeth
Journal Title
Journal ISSN
Volume Title
Publisher
University of Oregon
Abstract
This dissertation explores the issue of how institutional structures in the medical industry influence physician behavior. The analysis is particularly concerned with prepaid group practices, an organizational type that has tripled its enrollment since 1981. By 1988 more than thirty million Americans were enrolled in prepaid group practices .
The theoretical analysis predicts that physician labor supply is sensitive to the way in which physicians are paid . Specifically, salaried physicians supply less labor than wage earning physicians because they do not receive payment based on marginal work effort . An "ethical" physician will have a greater supply of both labor and medical care than a "standard optimizing" physician, although still not necessarily the "appropriate" level. Finally, usage of nonphysician medical inputs also differs depending on the way in which the physician is paid. Under some incentive schemes the physician tends to overuse inputs other than his own time. The model predicts that only profit-sharing physicians (both "ethical" and "standard optimizing") and "standard optimizing" salaried physicians will use medical inputs efficiently .
The dissertation also reports a test of one of the important theoretical results: Salaried physicians supply less labor than physicians working under incentive based reimbursement . Estimation of simultaneous labor demand and supply functions using data on American primary care physicians for the year 1984 confirms the theoretical prediction . A further result of the estimation is that salaried status does not affect the hourly wage of physicians.
Description
123 pages
Keywords
economics, institutional structures, physician behavior, physician labor, physician-patient relationship, labor supply, medical care