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Health Economics Research Programme, University of Oslo HERO On line Working Paper Series

No 2016:8:
Kickbacks, referrals and efficiency in health care markets: Experimental evidence

Christian Waibel and Daniel Wiesen ()

Abstract: We analyse the causal effect of kickbacks (referral payments) on general practitioners' behaviours and efficiency. In a stylized model, we derive behavioural predictions for general practitioners' diagnostic efforts and referrals to secondary care (specialized physicians), which we test in a series of controlled laboratory experiments. We exogenously vary the level of regulated referral payments in our experimental treatments. We find that introducing referral payments significantly improves efficiency. An increase in payments leads to less undertreatment of severely ill patients, but also to more unnecessary referrals of mildly ill patients. The net effect is positive, as the former outweighs the latter. Interestingly, the increase in efficiency is mainly driven by behavioural changes of barely altruistic general practitioners.

Keywords: Kickback; referral payment; diagnostic effort; referrals; altruism; efficiency; laboratory experiment; (follow links to similar papers)

JEL-Codes: C91; D47; I11; (follow links to similar papers)

55 pages, November 4, 2016

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