The hospital-physician interaction in U.S. hospitals: Evolving payment schemes and their incentives

doi:10.1016/0014-2921(94)00087-G

European Economic Review

Volume 39, Issues 3–4, April 1995, Pages 795-802

https://doi.org/10.1016/0014-2921(94)00087-G Get rights and content

Abstract

Unlike the case in several European countries, where physicians are salaried employees of the hospital, in the U.S. physicians are independent agents who are granted admitting privileges by their affiliated hospitals. Hospitals and physicians bill separately for their components of inpatient care, and patients or insurers compensate them separately. This has raised questions about the degree of efficiency and cooperation between the agents. In the first part of this paper we review previous models that examined this interaction under cost-based and prospective reimbursement. In the second part, we consider an experimental mechanism (‘price-bundling’) in which payers allow a single payment for an episode of care, leaving the physician and the hospital to negotiate over how the fee should be split. Modelling this as a Nash bargaining game, we cast doubt on the notion that price bundling can ensure cooperation and efficiency from the perspective of the players, and suggest other incentives that may have led hospitals to participate in the experiment.

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^∗: This paper does not represent policy of the U.S. Department of Health and Human Services (DHHS) or of the Agency for Health Care Policy and Research (AHCPR). The views expressed herein are solely those of the authors and no official endorsement by DHHS or AHCPR is intended or should be inferred.

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PaperThe hospital-physician interaction in U.S. hospitals: Evolving payment schemes and their incentives

Abstract

Antitrust law, immunity, and medical peer review boards

Buffalo Law Review

The hospital—physician interaction as a non-cooperative game: Is free riding all that bad?

Governing boards and profound organizational change in hospitals

Medical Care Review

Paper
The hospital-physician interaction in U.S. hospitals: Evolving payment schemes and their incentives