Monitoring institutions in healthcare markets: Experimental evidence

Abstract

This paper investigates the impact of monitoring institutions on market outcomes in health care. Healthcare markets are characterized by asymmetric information. Physicians have an information advantage over patients with respect to appropriate treatments, which they may exploit through over-or under-provision or by overcharging. We introduce two types of costly monitoring: endogenous and exogenous monitoring. When monitoring detects misbehavior, physicians have to pay a fine. Endogenous monitoring can be requested by patients, while exogenous monitoring is performed randomly by a third party. We present a toy model that enables us to derive hypotheses and test them in a laboratory experiment. Our results show that introducing endogenous monitoring reduces the level of undertreatment and overcharging. Even under high monitoring costs, the threat of patient monitoring is sufficient to discipline physicians. Exogenous monitoring also reduces undertreatment and overcharging when performed sufficiently frequently. Market efficiency increases when endogenous monitoring is introduced and when exogenous monitoring is implemented with sufficient frequency. Our results suggest that monitoring may be a feasible instrument to improve outcomes in healthcare markets. K E Y W O R D Scredence goods, laboratory experiment, monitoring, overtreatment, overcharging, physician behavior, undertreatment | INTRODUCTIONA key characteristic of healthcare markets is information asymmetry between patients and physicians. Patients consult physicians for treatment without knowing what type of treatment is needed to cure their illness. When diagnosing patients, physicians learn the true nature of the presenting disease and may exploit their informational advantage over patients through three forms of misbehavior: providing more treatment than necessary (overtreatment), charging for more treatment than provided (overcharging), and providing less treatment than necessary (undertreatment). Patients must trust that their physician is providing them with appropriate treatment, and as such, health services are often referred to as credence goods (Darby & Karni, 1973;Dulleck & Kerschbamer, 2006). Empirical evidence has documented physicians' reactions to financial incentives, suggesting that over-and undertreatment as well as overcharging are prevalent phenomena (

Exploring the factors impacting physicians’ attitudes toward health information exchange with patients in Jordanian hospitals

“…The present study has shown that monitoring may play a vital role in enhancing communication between physicians and their patients and improving healthcare quality. This result corroborates those of other studies [ 3 , 20 ], indicating that monitoring is an effective method for reducing mistreatment in the healthcare context.…”

“…Due to difficult economic conditions and mismanagement, the Jordanian government has become unable to effectively monitor the healthcare system or establish incentives for healthcare providers to increase quality and treat their patients appropriately. As Physicians enjoy an information advantage over patients concerning the appropriate treatment for the patient, it is highly possible that they use their informational advantage to increase personal income by ordering unnecessary tests or using irrelevant techniques or prescribing more expensive medicine despite the existence of cheaper generic medication [ 2 , 3 ]. It is certain that an absence of information interaction between a patient and a physician can produce ineffective outcomes in healthcare systems and preclude a patient from receiving high-quality treatment at a reasonable cost.…”

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

“…In particular, a health care framework has an impact on medical decision making in a laboratory setting. This is shown by various experimental studies (e.g., Ahlert et al., 2012; Angerer et al., 2021a; Kairies‐Schwarz et al., 2017; Kesternich et al., 2015).…”

“…For example, for credence goods markets, Angerer et al. (2021b) and Angerer, Glätzle‐Rützler, et al. (2021) look at the impact of monitoring and feedback platforms on market efficiency, and Greiner et al.…”

Physicians’ Incentives, Patients’ Characteristics, and Quality of Care a Systematic Experimental Comparison of Fee-for-Service, Capitation, and Pay for Performance

“…Typically applying neutral framings, experiments in the credence goods literature showed that overtreatment can be reduced by costly second opinions (Mimra et al, 2016), competition (Huck et al, 2016), and separating treatment from diagnosis and prescription decisions (Greiner et al, 2017). Recent experiments show that monitoring mechanisms with financial consequences reduce overtreatment and the overcharging of patients (Angerer et al, 2021;Hennig-Schmidt et al, 2019;and Groß et al, 2021). We complement these experiments by investigating whether performance-based financial incentives which implicitly rely on monitoring a physician's performance are capable of coping with non-optimal medical service provision such as overtreatment under FFS.…”