By the same authors

Incentives and Performance of Health Care Professionals

Research output: Contribution to specialist publicationArticle



Publication details

JournalOxford Research Encyclopedia of Economics and Finance
DateAccepted/In press - 15 Jul 2018
DatePublished (current) - 29 Aug 2018
Number of pages14
Original languageEnglish


Economists have long regarded health care as a unique and challenging area of economic activity on account of the specialized knowledge of health care professionals (HCPs) and the relatively weak market mechanisms that operate. This places a consideration of how motivation and incentives might influence performance at the center of research. As in other domains economists have tended to focus on financial mechanisms and when considering HCPs have therefore examined how existing payment systems and potential alternatives might impact on behavior. There has long been a concern that simple arrangements such as fee-for-service, capitation, and salary payments might induce poor performance, and that has led to extensive investigation, both theoretical and empirical, on the linkage between payment and performance. An extensive and rapidly expanded field in economics, contract theory and mechanism design, had been applied to study these issues. The theory has highlighted both the potential benefits and the risks of incentive schemes to deal with the information asymmetries that abound in health care. There has been some expansion of such schemes in practice but these are often limited in application and the evidence for their effectiveness is mixed. Understanding why there is this relatively large gap between concept and application gives a guide to where future research can most productively be focused.

Keywords: health care, physician, doctor, profession, incentives, contracts, performance, pay-for-performance, fee-for-service, mechanism design, principal agent theory

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