Physicians’ responses to financial and social incentives: A medically framed real effort experiment

Social Science and Medicine

Mylene Lagarde and Duane Blaauw , 2017

When planning radical health care reforms, governments often focus on the compensation structure, i.e. the different ways that healthcare providers can be paid, as it can have an impact on the efficiency of health care expenditure, as well as the quantity and quality of care delivered. While the effects of payment mechanisms (salary, fee-for-service, capitation) have been well described in theory, it has been challenging to study in the real world. Hence, laboratory experiments may be a valuable methodology to study the behavioural responses of health care providers.

This experiment undertaken in 2013, adds to new literature by designing a new medically framed real effort task to test the effects of different remuneration schemes in a multi-tasking context.

This study assesses the impact of different incentives on the quantity (productivity) and quality of outputs of 132 participants. It also tests whether the existence of benefits to patients influences effort. The results show that:

  • Salary yields the lowest quantity of output, and fee-for-service the highest.

  • The highest quality is achieved when participants are paid by salary, followed by capitation.

  • There is a lot of heterogeneity in behaviour, with intrinsically motivated individuals hardly sensitive to financial incentives.

  • When work quality benefits patients directly, subjects improve the quality of their output, while maintaining the same levels of productivity.

This paper adds to a nascent literature by providing a new approach to studying remuneration schemes and modelling the medical decision making environment in the lab.

Journal publication | Health workforce
Social Science and Medicine