A theoretical and empirical analysis on the relationship between payment schemes and physician quality
Date
2014-05
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Abstract
Physicians are expected to provide the best health care to their patients; however, it cannot be discounted that their practice is driven primarily by incentives. Empirical and theoretical studies have elaborated on the impact of payment schemes on physician output but have limited discussions on quality of services. In this paper, we reinvestigate such relationship by constructing a theoretical model of the relationship between compensation schemes and quality of services and testing such using a special physician test to gauge quality. Given that physicians can endogenously choose their payment scheme, we conduct multiple treatment effects regression to measure the impact of selecting among fixed payment, fee-for-service, and mixed payment on vignette scores and the standard deviation from a given benchmark while accounting for a facility factor that induces such selection. Results show that after accounting for the selection of the payment scheme, FFS and mixed payment yield higher scores than fixed payment, indicating that physicians are still below the best level of quality and that incentives to improve are still present. The results on mixed payment also highlight the potential of Philhealth as a fee-for-service component to motivate quality of care.
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Keywords
Physician, Quality of healthcare, Incentives, Compensation schemes