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Ownership and rent-seeking behavior in specialty health care practices

Author

Listed:
  • Dan Friesner

    (Gonzaga University)

  • Chris Stevens

    (Ohio University, Eastern Campus)

Abstract

Specialty health care practices are unique in that they exhibit a wide range of ownership types, from large corporations controlled by third parties to those directly owned by practitioners (physicians, therapists, etc.). Many of these practices also employ licensed assistants whose labor is partially substitutable with those of the practitioners. This paper presents a theoretical model that examines the impact that different levels of ownership have on rent-seeking behavior and efficiency within specialty practices. Our primary focus is on whether lower levels of ownership induce practitioners to extract larger economic rents by substituting their services for those of their assistants. We find that if the practitioners are not required to be technically efficient then they unambiguously respond to lower ownership with rent-seeking. However, requiring the firm to be technically (but not allocatively) efficient, may be sufficient to mitigate this incentive.

Suggested Citation

  • Dan Friesner & Chris Stevens, 2007. "Ownership and rent-seeking behavior in specialty health care practices," Economics Bulletin, AccessEcon, vol. 9(10), pages 1-14.
    • Handle: RePEc:ebl:ecbull:eb-06i10001
    as

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    File URL: http://www.accessecon.com/pubs/EB/2007/Volume9/EB-06I10001A.pdf
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    References listed on IDEAS

    as
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    More about this item

    Keywords

    efficiency;

    JEL classification:

    • I1 - Health, Education, and Welfare - - Health

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