Negative externality on service level across priority classes: Evidence from a radiology workflow platform

Abstract

We study the potential negative impact of imbalanced compensation schemes on firm performance. We analyze data from a radiology workflow platform that connects off‐site radiologists with hospitals. These radiologists select tasks from a common pool, while service level is defined by priority‐specific turnaround time targets. However, imbalances between pay and workload of different tasks could result in higher priority tasks with low pay‐to‐workload ratio receiving poorer service. We investigate this hypothesis, showing turnaround time is decreasing in pay‐to‐workload for lower priority tasks, whereas it is increasing in workload for high‐priority tasks. Crucially, we find evidence of an externality effect: Having many economically attractive tasks with low priority can lead to longer turnaround times for higher priority tasks, increasing their likelihood of delay, thus partially defeating the purpose of the priority classes.