Does performance disclosure influence physicians’ medical decisions? An experimental analysis

Pay-for-performance schemes targeting quality improvements and cost reductions in markets for medical care have become increasingly popular among health policy- makers during the last decade. Typically, such schemes attach financial incentives to a set of indicators which consist of some processed information that is believed to constitute an adequate description of the provider. Due to the asymmetric information inherent in medical markets, changes in the information structure are likely to cause substantial change to the environment in which health care providers operate. Since monitoring of physician treatment decisions is a necessary prerequisite in a pay-for performance scheme, and also an important factor influencing the information struc- ture in the market, disentangling the effect of a change in the information regime from a change in financial incentives is difficult. By means of a laboratory experiment we are able to identify the ceteris-paribus effect of a change in information regime. We find that introducing transparency, and making medical students’ treatment decisions known to their peers, have a positive impact on patients’ health benefit. The results also suggest that disclosure of physician performance increase social welfare.