Scandinavian Working Papers in Economics

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

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

Christian Waibel and Daniel Wiesen ()
Additional contact information
Christian Waibel: ETH Zurich, Postal: Department of Management, Technology and Economics, ETH Zurich, Switzerland
Daniel Wiesen: Department of Health Management and Health Economics, Postal: HERO / Department of Health Management and Health Economics, P.O. Box 1089 Blindern, NO-0317 Oslo, Norway

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

JEL-codes: C91; D47; I11

55 pages, November 4, 2016

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