How Much do Financial Incentives Matter to Physicians?

In this experiment, medical students were paid under fee-for-service and capitated payment to treat hypothetical patients. Here is Austin Frakt on the study:

In this experiment, medical students were paid under fee-for-service and capitated payment to treat hypothetical patients. Here is Austin Frakt on the study:

Oh, before I get to the results, one more cool thing about the experiment. The physician (student) participants actually earn the money they generate from treatments prescribed in the experiment. Since there are no actual patients, the researchers included an incentive for the physicians to take patient concerns seriously by converting patient benefits into contributions to a charity that cares for real patients. Given the constraints of experimenting on actual people, I think this is a very cool design. Still, one might wonder how things might be different in the presence of real, flesh and blood patients.

  OK, about the findings:

1. Payment systems matter. More services are provided under FFS than CAP. On average, patients receive more services than are optimal under the former and fewer than optimal under the latter.
2. Patient health matters. That is, physicians do respond to how much treatment benefits patients. Still, under FFS, patients in good and intermediate health are over-served. Under CAP, patients in poor and intermediate health are underserved.
3. Payment systems affect health (or patient benefit). Patients in good and intermediate health suffer losses under FFS due to overprovision. Patients in intermediate and poor health suffer losses under CAP due to under-provision.