Designing the report card content for healthcare payment reduction

Takahara, Tsuyoshi and Kanda, Yutaka (2023): Designing the report card content for healthcare payment reduction.

Abstract

This study analyzes the effect of the content of report cards on the optimal incentivized payment for physicians. Our analysis assumes that report card disclosure builds a reputation regarding physicians' ability among patients who do not have the expertise to know better. Furthermore, we assume that the insurer designs a payment scheme that designates high-ability physicians to provide advanced treatment and low-ability physicians to provide a conventional treatment. We compare the benchmark (no disclosure) with two disclosure policies: detailed, where patients can recognize what service was provided and the outcome of the advanced treatment for all physicians, and limited, where patients can distinguish only physicians who provided the advanced treatment successfully. Our analysis shows that detailed disclosure requires a higher expected payment than the benchmark, and the insurer can save it by limiting the informativeness of the report. Intuitively, detailed disclosure conveys physician type more precisely, and the insurer must pay an additional wage for the conventional treatment provided by low-ability physicians. Our result implies that incentivization by non-monetary method (report card) and monetary method (pay-for-performance) may work in both complement and substitute.

• Item Type: MPRA Paper
• Language: English
• Keywords: Principal-agent model, Reputation concern, Asymmetric information
• Subjects: D - Microeconomics > D2 - Production and Organizations > D23 - Organizational Behavior ; Transaction Costs ; Property Rights; D - Microeconomics > D8 - Information, Knowledge, and Uncertainty > D86 - Economics of Contract: Theory; I - Health, Education, and Welfare > I1 - Health > I18 - Government Policy ; Regulation ; Public Health

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