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How does the type of remuneration affect physician behaviour? Fixed salary versus fee-for-service

Author

Listed:
  • Kurt R. Brekke

    (Department of Economics, Norwegian School of Economics (NHH))

  • Tor Helge Holmäs

    (Uni Research Rokkan Centre)

  • Karin Monstad

    (Uni Research Rokkan Centre)

  • Odd Rune Straume

    (University of Minho and NIPE)

Abstract

We analyse the effects of two different types of physician remuneration - fee-for-service and fixed salary - on the treatment decisions of general practitioners (GPs) and on patients´ health outcomes. Using rich Norwegian register data during the period 2009-2013, we focus on GP locums working in a succession of temporary positions, which allows us to observe the same GPs working under different remuneration schemes within a relatively short period of time. We find that GPs respond strongly and consistently to changes in remuneration type. Compared with fixed salary, GP payment by fee-for-service leads to an increase in the supply of consultations and a higher provision of medical services (along several dimensions) per consultation. This has also signficant implications for patients´ health outcomes. The probability of experiencing an emergency admission to hospital shortly after a GP consultation is close to 20 percent lower if the GP is paid by fee-for-service instead of fixed salary. Overall, our analysis suggests that fixed-salary remuneration leads to underprovision of primary care.

Suggested Citation

  • Kurt R. Brekke & Tor Helge Holmäs & Karin Monstad & Odd Rune Straume, 2018. "How does the type of remuneration affect physician behaviour? Fixed salary versus fee-for-service," NIPE Working Papers 09/2018, NIPE - Universidade do Minho.
    • Handle: RePEc:nip:nipewp:09/2018
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    References listed on IDEAS

    as
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    More about this item

    Keywords

    Physicians; Primary care; Fixed salary; Fee-for-service.;
    All these keywords.

    JEL classification:

    • I11 - Health, Education, and Welfare - - Health - - - Analysis of Health Care Markets
    • I18 - Health, Education, and Welfare - - Health - - - Government Policy; Regulation; Public Health
    • J33 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Compensation Packages; Payment Methods

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