Scandinavian Working Papers in Economics

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

No 2020:3: Physician performance pay: Experimental evidence

Jeannette Brosig-Koch (), Heike Hennig-Schmidt (), Nadja Kairies-Schwarz (), Johanna Kokot () and Daniel Wiesen
Additional contact information
Jeannette Brosig-Koch: University of Duisburg-Essen and Health Economics Research Center, Postal: Berliner Platz 6-8, 45127 Essen, Germany
Heike Hennig-Schmidt: University of Bonn, Department of Economics, Postal: Adenauerallee 24-42, 53113 Bonn, Germany,
Nadja Kairies-Schwarz: University of Duisburg-Essen and CINCH Essen, Postal: Berliner Platz 68, 45127 Essen, Germany
Johanna Kokot: University of Hamburg and Hamburg Center for Health Economics, Postal: Esplanade 36, 20354 Hamburg, German,
Daniel Wiesen: University of Cologne, Department of Health Care Management, Postal: Albertus-Magnus-Platz, 50923 Cologne , Germany

Abstract: We analyze the causal effect of performance pay on physicians’ medical service provision and the quality of care. To address this effect, which is difficult to study in the field we conducted an online experiment with primary care physicians randomly drawn from a representative resident physician sample in Germany. Linking individual physicians’ behavioral data with administrative data enables us to identify how practice charac teristics account for the heterogeneity in individual physicians’ responses to performance incentives, which field data do not allow in general. We find that performance pay reduces underprovision of medical care compared to lump-sum capitation. The effect increases with patients’ severities of ill ness. Already small incentives are effective in enhancing the quality of care. Our results further indicate that physicians in high-profit practices and practicing in cities are most responsive to incentives.

Keywords: pay for performance; behavioral experiment; practice charac teristics

JEL-codes: C93; I11

97 pages, July 9, 2020

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