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

Abstract

Many health care systems use provider payment as an instrument to ensure an efficient and equitable delivery of care. Capitation-based payment schemes are popular because they contain costs. However, they are known to lead to underprovision of care, especially to high-need patients. Using a laboratory experiment, we test whether the availability of resources affects providers' response to a capitation-based scheme. We find that the relative underprovision of care to high-need patients exists both when providers are resource abundant and constrained. Next, we introduce two different versions of the scheme and test whether they incentivise providers to take better care of high-need patients. One scheme ring-fences part of the capitation payment to a fixed physician salary, whilst the other scheme differentiates payments based on patients' expected need of care. We find that high-need patients gain the most from a fixed provider salary under resource abundance, but find no difference in gains between patient types under resource constraint. Our results also show that differentiation of capitation make providers take relatively better care of patients linked to an above average payment compared to a below average payment, regardless of resource constraints. Our findings suggest that both the design of the scheme and the market condition affect providers' patient prioritisation under capitation.

Increasing capitation in mixed remuneration schemes: Effects on service provision and process quality of care

“…Hence, our empirical approach extends and supplements the evidence from laboratory experiments where the respondent is exposed to patients subject to varying remuneration incentives. Our results largely comply with findings in the laboratory literature (Brosig‐Koch et al., 2017; Hennig‐Schmidt et al., 2011; Oxholm et al., 2019). Hence, we provide empirical support for the evidence provided by laboratory experiment studies of financial incentives.…”

“…Hypothesis 3 follows from the literature using laboratory experiments (Brosig‐Koch et al., 2017; Hennig‐Schmidt et al., 2011; Oxholm et al., 2019). Some intuitive reasoning based on the conventional model of physician utility maximization can however be made by adding information from the studies explicitly modeling heterogenous patients in the utility model (Olsen, 2012).…”

“…Further, they perform a laboratory experiment which confirms the prediction of the theoretical model. A conventional result from the theoretical and laboratory literature is that the reduction in service provision associated with capitation schemes are more pronounced for patients with higher need for care (Barham & Milliken, 2015; Brosig‐Koch et al., 2017; Oxholm et al., 2019). Hence, it is relevant to study if such behaviors are also related to increased capitation shares in a mixed scheme.…”

Who benefits from quality competition in health care? A theory and a laboratory experiment on the relevance of patient characteristics

“…Even though no subject takes the role of a patient, real patients outside the lab benefit from the subjects' treatment decisions: subjects are informed that the monetary equivalent of the total patient benefit resulting from their decisions is transferred to an organization which has an impact for real patients. Similar mechanisms have been employed in numerous experiments analyzing physician behavior (e.g., Attema et al., 2023; Brosig‐Koch et al., 2016; Brosig‐Koch, Hennig‐Schmidt, et al., 2017; Brosig‐Koch et al., 2019; Byambadalai et al., 2021; Di Guida et al., 2019; Hennig‐Schmidt et al., 2011; Kesternich et al., 2015; Lagarde & Blaauw, 2017; Martinsson & Persson, 2019; Oxholm et al., 2019, 2021; Wang et al., 2020). 14 The monetary health benefit was transferred to Christoffel Blindenmission, which uses the money exclusively for surgical treatment of patients with eye cataract (for details of the procedure, see Section 3.2).…”

Exploring physician agency under demand‐side cost sharing—An experimental approach

“…3 Hennig-Schmidt et al (2011), one of the first health economics experiments incentivizing health benefit, transferred the monetary equivalent of patient health benefit to a German charity. Recent contributions using similar procedure includes for example, Kesternich et al (2015); Brosig-Koch et al (2017a,b); Oxholm et al (2019Oxholm et al ( , 2021 and Waibel and Wiesen (2021). Wang et al (2020) modified this procedure so that the money was transferred to the in-hospital-account of a cancer patient for his treatment.…”