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Designing the report card content for healthcare payment reduction

Author

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  • Takahara, Tsuyoshi
  • Kanda, Yutaka

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.

Suggested Citation

  • Takahara, Tsuyoshi & Kanda, Yutaka, 2023. "Designing the report card content for healthcare payment reduction," MPRA Paper 118529, University Library of Munich, Germany.
    • Handle: RePEc:pra:mprapa:118529
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    File URL: https://mpra.ub.uni-muenchen.de/118529/1/20230907.pdf
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    References listed on IDEAS

    as
    1. Bengt Holmstrom, 1999. "Managerial Incentive Problems: A Dynamic Perspective," NBER Working Papers 6875, National Bureau of Economic Research, Inc.
    2. Henry Y. Mak, 2017. "Provider performance reports and consumer welfare," RAND Journal of Economics, RAND Corporation, vol. 48(1), pages 250-280, March.
    3. Bengt Holmström, 1999. "Managerial Incentive Problems: A Dynamic Perspective," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 66(1), pages 169-182.
    Full references (including those not matched with items on IDEAS)

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    More about this item

    Keywords

    Principal-agent model; Reputation concern; Asymmetric information;
    All these keywords.

    JEL classification:

    • D23 - Microeconomics - - Production and Organizations - - - Organizational Behavior; Transaction Costs; Property Rights
    • D86 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Economics of Contract Law
    • I18 - Health, Education, and Welfare - - Health - - - Government Policy; Regulation; Public Health

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