Payment Mechanisms and the Composition of Physician Practices: Balancing Cost‐Containment, Access, and Quality of Care

Abstract

We take explicit account of the way in which the supply of physicians and patients in the economy affects the design of physician remuneration schemes, highlighting the three-way trade-off between quality of care, access, and cost. Both physicians and patients are heterogeneous. Physicians choose both the number of patients and the quality of care to provide to their patients. When determining physician payment rates, the principal must ensure access to care for all patients. When physicians can adjust the number of patients seen, there is no incentive to over-treat. In contrast, altruistic physicians always quality stint: they prefer to add an additional patient, rather than to increase the quality of service provided. A mixed payment mechanism does not increase the quality of service provided with respect to capitation. Offering a menu of compensation schemes may constitute a cost-effective strategy for inducing physicians to choose a given overall caseload but may also generate difficulties with access to care for frail patients.

The Effects of Introducing Mixed Payment Systems for Physicians: Experimental Evidence

“…Several theoretical papers argue that the more altruistic physicians should be paid on a capitated basis (e.g., Eggleston, ; Jack, ) regardless of the patient's severity of illness. Barham and Milliken () show, however, that high‐severity patients should be treated by physicians paid by FFS, whereas the least altruistic physicians treating healthy patients should be paid by CAP. Our behavioral results demonstrate that mixed payment systems—if designed such that tradeoffs between profit maximization and rendering the optimal benefit to the patient are reduced—might help to incentivize less altruistic physicians to choose patient‐optimal care for both low‐severity and high‐severity patients.…”

Taking care of high-need patients in capitation-based payment schemes – an experimental investigation into the importance of market conditions

“…Our first research question addresses how physicians prioritise patients in a capitationbased system. According to the literature, high-need patients suffer the greatest loss of care under this payment scheme (Barham and Milliken 2015;Brosig-Koch et al 2015;Ellis 1998;Hennig-Schmidt, Selten, and Wiesen 2011). Nonetheless, it has not yet been studied thoroughly how resource constraints affect care provision of high-need patients under capitation.…”

“…The drawback of capitation-based payment schemes is that it forces physicians to make a trade-off between own income and patient benefits thereby incentivising them to provide less than the patient-optimal amount of care (Barham and Milliken 2015;Brosig-Koch et al 2015;Ellis 1998;Ellis and McGuire 1986;Hennig-Schmidt, Selten, and Wiesen 2011). The literature has shown that it is the high-need patients who suffer the greatest loss of care from this trade-off (Barham and Milliken 2015;Brosig-Koch et al 2015;Ellis 1998;Hennig-Schmidt, Selten, and Wiesen 2011), implying that capitation potentially leads to an inequitable distribution of health care.…”

“…Third-party payers can alter the payment scheme in different ways to improve highneed patients' access to care. The literature has mainly focused on mixing capitation with fee-for-service payments (Barham and Milliken 2015;Brosig-Koch et al 2015;Ellis 1998;Ellis and McGuire 1986;Hennig-Schmidt, Selten, and Wiesen 2011). Missing in the literature is an investigation of alternative designs of the capitation-based models.…”

Payment models in primary health care: A driver of the quantity and quality of medical laboratory utilization

“…As pointed out by Chalkley and Listl (2018) who study remuneration's impact on the incidence of X-rays in dentistry, the imperative to balance clinical harms and benefits should not be influenced by payment models. The ordering of lab tests provides a well-defined context to assess the impacts of payment models on clinical practices that have no 1 For example, Barham and Milliken (2015), Barros (2003), Clemens and Gottlieb (2014), and Helmchen and Lo Sasso (2010). direct financial impact on physicians but may be redundant/costly and potentially produce biased evidence regarding patient health.…”