Bardey, David, Cremer, Helmuth and Lozachmeur, Jean-Marie (2012) Doctors' remuneration schemes and hospital competition in two-sided markets. The B.E. Journal of Economic Analysis & Policy, 12 (1).

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Abstract

This paper studies the design of doctors’ remuneration schemes. Two for-profit hospitals compete to attract patients and to affiliate doctors. The numbers of patients and doctors determine an
hospital’s quality level which is valued on both sides. Quality can be enhanced by doctors through
a (costly) effort. We first consider pure salary, case payment or fee-for-service schemes on the doctors’ side. Then, we study schemes that mix fee-for-service with either salary or case payments.
We show that case payment schemes (either pure or in combination with fee-for-service) are more
patient friendly than (pure or mixed) salary schemes. This comparison is exactly reversed on the
doctors’ side. Quite surprisingly, patients always lose when a fee-for-service scheme is introduced
(pure or mixed). This is true even though the fee-for-service is the only way to induce the doctors
to exert effort, and whatever the patients’ valuation of this effort. In other words, the increase in
doctors’ effort brought about by the fee-for-service is more than compensated by the increase in
fees faced by patients.

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• Doctors' remuneration schemes and hospital competition in two-sided markets with common network externalities. (deposited 18 Jan 2012 05:45)
  • Doctors' remuneration schemes and hospital competition in two-sided markets. (deposited 09 Jul 2014 17:32) [Currently Displayed]