Physician Behavior under Prospective Payment Schemes-Evidence from Artefactual Field and Lab Experiments

Looking inside the lab: a systematic literature review of economic experiments in health service provision

Experimental economics is, nowadays, a well-established approach to investigate agents' behavior under economic incentives. In the last decade, a fast-growing number of studies have focused on the application of experimental methodology to health policy issues. The results of that stream of literature have been intriguing and strongly policy oriented. However, those findings are scattered between different health-related topics, making it difficult to grasp the overall state-of-the-art. Hence, to make the main contributions understandable at a glance, we conduct a systematic literature review of laboratory experiments on the supply of health services. Of the 1248 articles retrieved from 2011, 56 articles published in peer-review journals have met our inclusion criteria. Thus, we have described the experimental designs of each of the selected papers and we have classified them according to their main area of interest.

Strategic behaviour and decision making in competitive hospital markets: an experimental investigation

We investigate quality provision and the occurrence of strategic behaviour in competitive hospital markets where providers are assumed to be semi-altruistic towards patients. For this, we employ a laboratory experiment with a hospital market framing. Subjects decide on the quality levels for one of three competing hospitals respectively. We vary the organizational aspect of whether quality decisions within hospitals are made by individuals or teams. Realized monetary patient benefits go to real patients outside the lab. In both settings, we find that degrees of cooperation quickly converge towards negative values, implying absence of collusion and patient centred or competitive quality choices. Moreover, hospitals treat quality as a strategic complement and adjust their quality choice in the same direction as their competitors. The response magnitude for team markets is weaker; this is driven by non-cooperative or altruistic teams, which tend to set levels of quality that are strategically independent.

Impact of capitation on physicians' behavior among patients with hypertension: an interrupted time series study in rural China

OBJECTIVE

The purpose of this study is to explore the change in physicians' hypertension treatment behavior before and after the reform of the capitation in county medical community.

METHODS

Spanning from January 2014 to December 2019, monthly data of outpatient and inpatient were gathered before and after the implementation of the reform in April 2015. We employed interrupted time series analysis method to scrutinize the instantaneous level and slope changes in the indicators associated with physicians' behavior.

RESULTS

Several indicators related to physicians' behavior demonstrated enhancement. After the reform, medical cost per visit for inpatient exhibited a reverse trajectory (-53.545, 95%CI: -78.620 to -28.470, p < 0.01). The rate of change in outpatient drug combination decelerated (0.320, 95%CI: 0.149 to 0.491, p < 0.01). The ratio of infusion declined for both outpatient and inpatient cases (-0.107, 95%CI: -0.209 to -0.004, p < 0.1; -0.843, 95%CI: -1.154 to -0.532, p < 0.01). However, the results revealed that overall medical cost per visit and drug proportion for outpatient care continued their initial upward trend. After the reform, the decline of drug proportion for outpatient care was less pronounced compared to the period prior to the reform, and length of stay also had a similar trend.

CONCLUSION

To some extent, capitation under the county medical community encourages physicians to control the cost and adopt a more standardized diagnosis and treatment behavior. This study provides evidence to consider the impact of policy changes on physicians' behavior when designing payment methods and healthcare systems aimed at promoting PHC.

A new look at physicians' responses to financial incentives: Quality of care, practice characteristics, and motivations

There is considerable controversy about what causes (in)effectiveness of physician performance pay in improving the quality of care. Using a behavioral experiment with German primary-care physicians, we study the incentive effect of performance pay on service provision and quality of care. To explore whether variations in quality are based on the incentive scheme and the interplay with physicians' real-world profit orientation and patient-regarding motivations, we link administrative data on practice characteristics and survey data on physicians' attitudes with experimental data. We find that, under performance pay, quality increases by about 7pp compared to baseline capitation. While the effect increases with the severity of illness, the bonus level does not significantly affect the quality of care. Data linkage indicates that primary-care physicians in high-profit practices provide a lower quality of care. Physicians' other-regarding motivations and attitudes are significant drivers of high treatment quality.

Policy and Payment Decisions on Peritoneal Dialysis in the United States: A Review

End-stage kidney disease (ESKD) accounts for a sizable proportion of Medicare spending. Peritoneal dialysis remains an underutilized treatment modality for ESKD despite its quality of life and cost-saving benefits. Medicare policy on reimbursements and patient eligibility for dialysis coverage has been amended numerous times since its inception in 1972. Over the last two decades, Medicare policy on ESKD reimbursements has evolved from a primarily fee-for-service model to a prospective payment system, and within the past few years, it has begun including more experimental payment structures. While prior work has explored the evolution of Medicare's ESKD policy as a whole, we specifically outline the impact of Medicare policy changes on peritoneal dialysis reimbursement rates, uptake by physicians and dialysis facilities, and accessibility to patients. This narrative review offers historical insights, an overview of modern ESKD policy, actionable strategies, and policy opportunities to increase the accessibility of this treatment modality.

The effect of internal salary incentives based on insurance payment on physicians' behavior: experimental evidence

BACKGROUND

Understanding how physicians respond to payment methods is crucial for designing effective incentives and enhancing the insurance system. Previous theoretical research has explored the effects of payment methods on physician behavior based on a two-level incentive path; however, empirical evidence to validate these theoretical frameworks is lacking. To address this research gap, we conducted a laboratory experiment to investigate physicians' behavioral responses to three types of internal salary incentives based on diagnosis-related-group (DRG) and fee-for-service (FFS).

METHODS

A total of 150 medical students from Capital Medical University were recruited as participants. These subjects played the role of physicians in choosing the quantity of medical services for nine types of patients under three types of salary incentives-fixed wage, constant fixed wage with variable performance wage, and variable fixed wage with variable performance wage, of which performance wage referred to the payment method balance under FFS or DRG. We collected data on the quantities of medical services provided by the participants and analyzed the results using the Friedman test and the fixed effects model.

RESULTS

The results showed that a fixed wage level did not have a significant impact on physicians' behavior. However, the patients benefited more under the fixed wage compared to other salary incentives. In the case of a floating wage system, which consisted of a constant fixed wage and a variable performance wage from the payment method balance, an increase in performance wage led to a decrease in physicians' service provision under DRG but an increase under FFS. Consequently, this resulted in a decrease in patient benefit. When the salary level remained constant, but the composition of the salary varied, physicians' behavior changed slightly under FFS but not significantly under DRG. Additionally, patient benefits decreased as the ratio of performance wages increased under FFS.

CONCLUSIONS

While using payment method balance as physicians' salary may be effective in transferring incentives of payment methods to physicians through internal compensation frameworks, it should be used with caution, particularly when the measurement standard of care is imperfect.

Changing preferences: An experiment and estimation of market-incentive effects on altruism

This paper studies how altruistic preferences are changed by markets and incentives. We conduct a laboratory experiment with a within-subject design. Subjects are asked to choose health care qualities for hypothetical patients in monopoly, duopoly, and quadropoly. Prices, costs, and patient benefits are experimental incentive parameters. In monopoly, subjects choose quality by trading off between profits and altruistic patient benefits. In duopoly and quadropoly, subjects play a simultaneous-move game. Uncertain about an opponent's altruism, each subject competes for patients by choosing qualities. Bayes-Nash equilibria describe subjects' quality decisions as functions of altruism. Using a nonparametric method, we estimate the population altruism distributions from Bayes-Nash equilibrium qualities in different markets and incentive configurations. Competition tends to reduce altruism, but duopoly and quadropoly equilibrium qualities are much higher than monopoly. Although markets crowd out altruism, the disciplinary powers of market competition are stronger. Counterfactuals confirm markets change preferences.

Who benefits from quality competition in health care? A theory and a laboratory experiment on the relevance of patient characteristics

We study how competition between physicians affects the provision of medical care. In our theoretical model, physicians are faced with a heterogeneous patient population, in which patients systematically vary with regard to both their responsiveness to the provided quality of care and their state of health. We test the behavioral predictions derived from this model in a controlled laboratory experiment. In line with the model, we observe that competition significantly improves patient benefits as long as patients are able to respond to the quality provided. For those patients, who are not able to choose a physician, competition even decreases the patient benefit compared to a situation without competition. This decrease is in contrast to our theoretical prediction implying no change in benefits for passive patients. Deviations from patient-optimal treatment are highest for passive patients in need of a low quantity of medical services. With repetition, both, the positive effects of competition for active patients as well as the negative effects of competition for passive patients become more pronounced. Our results imply that competition can not only improve but also worsen patient outcome and that patients' responsiveness to quality is decisive.

The formation of physician altruism

We study how patient-regarding altruism is formed by medical education. We elicit and structurally estimate altruistic preferences using experimental data from a large sample of medical students (N = 733) in Germany at different progress stages in their studies. The estimates reveal substantial heterogeneity in altruistic preferences of medical students. Patient-regarding altruism is highest for freshmen, significantly declines for students in the course of medical studies, and tends to increase again for last year students, who assist in clinical practice. Also, patient-regarding altruism is higher for females and positively associated to general altruism. Altruistic medical students have gained prior practical experience in healthcare, have lower income expectations, and are more likely to choose surgery and pediatrics as their preferred specialty.

Effects of fee-for-service, diagnosis-related-group, and mixed payment systems on physicians’ medical service behavior: experimental evidence

Background

Healthcare reforms in many countries have shown a movement from pure payment systems to mixed payment systems. However, there remains an insufficient understanding of how to design better mixed payment systems and how such systems, especially Diagnosis-Related-Group (DRG)-based systems, benefit patients. We therefore designed a controlled laboratory experiment to investigate the effects of fee-for-service (FFS), DRG, and mixed payment systems on physicians’ service provision.

Methods

A total of 210 medical students were recruited from Capital Medical University as subjects. They, in the role of physicians, were randomly divided into seven groups and chose the quantity of medical services for different patient types under pure FFS, pure DRG, or mixed payment schemes that included two FFS-based mixed payment schemes and three DRG-based mixed payment schemes. There were five rounds of each group of experiments, and each subject made 18 decisions per round. The quantity of medical services provided by subjects were collected. And relevant statistics were computed and analyzed by nonparametric tests and random effects model.

Results

The results showed that the physicians’ overprovision (underprovision) of services under FFS (DRG) schemes decreased under mixed payment schemes, resulting in higher benefit to patients under mixed payment schemes. Patients’ health conditions also affected physicians’ behavior but in different directions. Higher disease severity was associated with higher deviation of physicians’ quantity choices from the optimal quantity under DRG and DRG-based mixed payment schemes, while the opposite was found for FFS and FFS-based mixed payment schemes.

Conclusions

Mixed payment systems are a better way to balance physicians’ profit and patients’ benefit. The design of mixed payment systems should be adjusted according to the patient’s health conditions. When patients are in lower disease severity and resource consumption is relatively small, prospective payments or mixed systems based on prospective payments are more suitable. While for patients in higher disease severity, retrospective payments or mixed systems based predominantly on retrospective payments are better.

Supplementary Information

The online version contains supplementary material available at 10.1186/s12913-022-08218-5.

How value-based policy interventions influence price negotiations for new medicines: An experimental approach and initial evidence

BACKGROUND

Various forms of value-based pricing policies for new medicines have recently been introduced in OECD countries. While these initiatives are expected to have a positive impact on societal outcomes such as availability, affordability and value for money, scientific evidence on this impact is scarce due to confidential agreements.

OBJECTIVE

We aimed to assess the impact of value-based policy interventions in price negotiations on patient benefit in an experimental setting.

METHODS

An online experiment was conducted (n = 269). Participants were randomly assigned into the active role of either a buyer or seller in two intervention groups (cost-benefit, risk-sharing) and one control group. Decisions had real monetary consequences on other participants and through donations to a patient association.

RESULTS

Patient access, benefit and value for money were higher in the cost-benefit group than in the risk-sharing group. An available alternative to the agreement led to higher price offers. This effect was weaker in the cost-benefit group.

CONCLUSIONS

Outcomes of price negotiations on patient benefit depend on the alternatives available for failed or delayed negotiations. A shared but voluntary valuation framework might increase patient access, benefit, and value for money. The cost containment effect of risk-sharing agreements may be offset by the negative impact on overall patient benefit. Further development of the approach could provide support for policy design of pharmaceutical pricing regulations.

Assessing social preferences in reimbursement negotiations for new Pharmaceuticals in Oncology: an experimental design to analyse willingness to pay and willingness to accept

Background

Price negotiations for specialty pharmaceuticals take place in a complex market setting. The determination of the added value of new treatments and the related societal willingness to pay are of increasing importance in policy reform debates. From a behavioural economics perspective, potential cognitive biases and other-regarding concerns affecting outcomes of reimbursement negotiations are of interest. An experimental setting to investigate social preferences in reimbursement negotiations for novel, oncology pharmaceuticals was used. Of interest were differences in social preferences caused by incremental changes of the patient outcome.

Methods

An online experiment was conducted in two separate runs (n = 202, n = 404) on the Amazon Mechanical Turk (MTurk) platform. Populations were split into two (run one) and four (run two) equally sized treatment groups for hypothetical reimbursement decisions. Participants were randomly assigned to the role of a public price regulator for pharmaceuticals (buyer) or a representative of a pharmaceutical company (seller). In run two, role groups were further split into two different price magnitude framings (“real world” vs unconverted “real payoff” prices). Decisions had real monetary effects on other participants (in the role of premium payers or investors) and via charitable donations to a patient organisation (patient benefit).

Results

56 (run one) and 59 (run two) percent of participants stated strictly monotone preferences for incremental patient benefit. The mean incremental cost-effectiveness ratio (ICER) against standard of care (SoC) was higher than the initial ICER of the SoC against no care. Regulators stated lower reservation prices in the “real world” prices group compared to their colleagues in the unconverted payoff group. No price group showed any reluctance to trade. Overall, regulators rated the relevance of the patient for their decision higher and the relevance of their own role lower compared to sellers.

Conclusions

The price magnitude of current oncology treatments affects stated preferences for incremental survival, and assigned responsibilities lead to different opinions on the relevance of affected stakeholders. The design is useful to further assess effects of reimbursement negotiations on societal outcomes like affordability (cost) or availability (access) of new pharmaceuticals and test behavioural policy interventions.

Supplementary Information

The online version contains supplementary material available at 10.1186/s12913-021-06231-8.

Resource scarcity and prioritization decisions in medical care: A lab experiment with heterogeneous patient types

During the COVID-19 pandemic, health care systems around the world have received additional funding, while at other times, financial support has been lowered to consolidate public spending. Such budget changes likely affect provision behavior in health care. We study how different degrees of resource scarcity affect medical service provision and, in consequence, patients' health. In a controlled lab environment, physicians are paid by capitation and allocate limited resources to several patients. This implies a trade-off between physicians' profits and patients' health benefits. We vary levels of resource scarcity and patient characteristics systematically and observe that most subjects in the role of physician devote a relatively stable share of budget to patient treatment, implying that they provide fewer services when they face more severe budget constraints. Average patient benefits decrease in proportion to physician budgets. The majority of subjects chooses an allocation that leads to equal patient benefits as opposed to allocating resources efficiently.

Custom-made health-care: an experimental investigation

BACKGROUND

Physicians' financial interests might conflict with the best service to patients. It is essential to gain a thorough understanding of the effect of remuneration systems on physician behaviour.

METHODS

We conducted a controlled laboratory experiment using a within-subject design to investigate physician behaviour underpayment heterogeneity. Each physician provided medical care to patients whose treatments were paid for under fee-for-service (FFS) or capitation (CAP).

RESULTS

We observed that physicians customized their care in response to the payment system. FFS patients received considerably more medical care than did CAP patients with the same illness and treatment preference. Physicians over-served FFS patients and under-served CAP patients. After a CAP payment reduction, we observed neither a quantity reduction under CAP nor a spillover in FFS patients' treatment.

CONCLUSIONS

The results suggest that, in our experimental model, fee regulation can be used to some extent to control physician spending since we did not identify a behavioural response to the CAP payment cut. Physicians did not recoup lost income by altering treatment behaviour toward CAP and/or FFS patients. Experimental economics is an excellent tool for ensuring the welfare of all those involved in the health system. Further research should investigate payment incentives as a means of developing health care teams that are more efficient.

Performance Pay in Hospitals: An Experiment on Bonus-Malus Incentives

Recent policy reforms in Germany require the introduction of a performance pay component with bonus–malus incentives in the inpatient care sector. We conduct a controlled online experiment with real hospital physicians from public hospitals and medical students in Germany, in which we investigate the effects of introducing a performance pay component with bonus–malus incentives to a simplified version of the German Diagnosis Related Groups (DRG) system using a sequential design with stylized routine cases. In both parts, participants choose between the patient optimal and profit maximizing treatment option for the same eight stylized routine cases. We find that the introduction of bonus–malus incentives only statistically significantly increases hospital physicians’ proportion of patient optimal choices for cases with high monetary baseline DRG incentives to choose the profit maximizing option. Medical students behave qualitatively similar. However, they are statistically significantly less patient oriented than real hospital physicians, and statistically significantly increase their patient optimal decisions with the introduction of bonus–malus incentives in all stylized routine cases. Overall, our results indicate that whether the introduction of a performance pay component with bonus–malus incentives to the (German) DRG system has a positive effect on the quality of care or not particularly depends on the monetary incentives implemented in the DRG system as well as the type of participants and their initial level of patient orientation.